A rapid slowdown in the rate of U.S. inflation appears to have lost steam, potentially raising questions about how aggressively the Federal Reserve will cut interest rates early next year.

October's Consumer Price Index (CPI) will serve as the latest test of whether an inflation resurgence is a risk to the US economy as the Federal Reserve debates its next interest rate decision after cutting rates by a quarter percentage point last week.

Federal Reserve Bank of Minneapolis President Neel Kashkari said he’ll be looking at incoming inflation data to determine whether another interest-rate cut is appropriate at the US central bank’s December meeting.

The Federal Reserve cut interest rates by 0.25% on November 7. More interest rate cuts are likely through the end of 2026.

The Fed surprised many in September when it voted to cut the federal funds rate by a half-percent instead of the expected quarter-percent. The Federal Open Market Committee lowered the federal funds rate to 4.75% to 5% after holding interest rates at record highs for more than a year in an attempt to bring soaring inflation back down to 2%.

The Fed is set to lower interest rates a quarter point Thursday. But it's more likely to slow, rather than speed up, 2025 cuts due to inflation

Federal Reserve Bank of Minneapolis President Neel Kashkari said the US economy has remained remarkably strong as the central bank progressed in beating back inflation, but the Fed was still “not all the way home.

If that is sustained and we are in a structurally more productive economy going forward, then that tells me we probably wouldn’t end up cutting quite as far.”

Minneapolis Fed President Kashkari on Saturday said there would probably be fewer interest rate cuts than expected if the U.S. economy stayed strong. Read more here.