The November Consumer Price Index (CPI) rose 3.1% on an annual...

The November Consumer Price Index (CPI) rose 3.1% on an annual basis, in line with estimates from economists polled by Reuters, as a drop in gasoline prices was overshadowed by a rise in rents.

Core prices, excluding volatile items such as food and energy costs, also matched expectations, showing a 4% annual rise.

On a month-on-month basis, consumer prices ticked up 0.1% last month, compared with estimates of remaining unchanged.

Markets had recently been pricing in a rate cut by the Federal Reserve as soon as March, but traders pared those bets and are now targeting May for the first rate cut after the central bank began its hiking cycle in March 2022.

Expectations for a cut of at least 25 basis points in March fell to 43.7%, from about 50% before the data, according to the CME Group's FedWatch Tool.

The market is now pricing in a chance of about 78% for a cut in May, up from about 75% on Monday.

"The market is certainly assuming that inflation is going to keep coming down, that earnings in this next year are going to show some decent growth and the Fed is going to cut rates," said Scott Wren, senior global market strategist at the Wells Fargo Investment Institute in St. Louis.

"The market is counting on more of a soft landing that would allow the Fed to ease up."