BI Survey Highlights Persistent Grocery Inflation, Complicating Fed Rate Cut Outlook

On December 2, 2025, BI published survey results showing widespread consumer frustration with rising grocery (90% of respondents) and dining-out costs (87%), despite a buoyant stock market [1]. This anecdotal data underscores sticky food inflation—a critical component (≈13%) of the CPI basket—at a time when the Fed faces a dual mandate dilemma: addressing frozen labor markets vs. controlling inflation perceptions [1]. The government shutdown has delayed official October and November CPI reports (originally scheduled for release in November and December 2025), leaving the Fed with incomplete real-time economic data ahead of its December 10 meeting [2]. Immediate market reaction was mixed: the S&P 500 (6,844.49) and NASDAQ Composite (23,497.24) rose, while the Dow Jones Industrial Average (47,459.27) declined, reflecting uncertainty about the Fed’s decision and its sector-specific impacts [0].

1. Anecdotal Data as a Preview:
   While the BI survey is small (≈200 non-scientific respondents), its focus on non-discretionary food costs—highly visible to consumers—suggests inflation perceptions remain elevated, a factor the Fed considers in policy decisions [1].
2. Delayed Data Amplifies Uncertainty:
   The shutdown-induced CPI delay means the Fed will not have complete inflation data when announcing its December policy, increasing the risk of unexpected decisions that could roil markets [2].
3. Market Sentiment Disconnect:
   Traders maintain strong expectations for a December rate cut (87.6% per CME FedWatch) despite the inflation warning, indicating potential market volatility if the Fed pauses or reduces cut size [3].

• Inflation Surprise Risk:
  If the delayed December 18 CPI report shows higher-than-expected food inflation, the Fed may pause rate cuts, disappointing market expectations and leading to volatility [1].
• Consumer Spending Risk:
  Persistent food price increases could reduce discretionary spending, negatively impacting earnings in retail and consumer goods sectors [1].
• Policy Uncertainty Risk:
  The lack of timely data increases the chance of unexpected Fed decisions, creating short-term market instability [2].
• Labor Market Risk:
  A frozen job market, combined with rising food costs, could weaken consumer confidence further, exacerbating economic headwinds [1].

This analysis synthesizes BI’s consumer inflation survey, delayed CPI data context, and immediate market reactions. The core issues include sticky food inflation perceptions, the Fed’s data deficit due to government shutdown, and mixed market sentiment about rate cut prospects. Decision-makers should monitor the upcoming December 18 CPI report, Fed communication, and consumer spending trends for further clarity.

All data is cited via the numbered reference system below.