Wall Street surged higher on Thursday as official figures delayed by the government shutdown showed that the annual rate of US inflation slowed unexpectedly.

The US consumer prices index rose 2.7% in the year to November, down from 3.0% in the year to September. This was lower than forecasts, with economists expecting a rise to 3.1%.

On a monthly basis, prices rose by 0.2 percentage points in the two months from September 2025 to November 2025, the US Bureau of Labor Statistics said. Core inflation, which stripped out food and energy prices, rose 2.6% over the last 12 months.

It also came as applications for unemployment benefits dropped for the week ending 13 December, after rising the previous week.

The Labor department reported that initial jobless claims fell by 13,000 to 224,000, while the four-week moving average ticked up slightly to 217,500. Ongoing unemployment claims for the week ending 6 December rose to 1.89 million.

The news sent bets that the Federal Reserve will cut interest rates again in January slightly higher, with traders now seeing 26.6% odds of a rate cut next month, compared to 24% a day earlier.

Elsewhere, the FTSE 100 (^FTSE) and European stocks recovered ground after a muted start, as traders digested interest rate decisions from both the Bank of England (BoE) and the European Central Bank (ECB).

The Monetary Policy Committee (MPC) cut UK interest rates from 4% to 3.75% as widely expected, as households face rising unemployment and declining inflation. This has taken borrowing costs down to their lowest level since January 2023.

Read more: Interest rates cut to lowest level in nearly three years

It came as money markets indicated a 97.5% chance of a quarter-point rate cut, and only a 2.5% possibility that rates were left at 4%. The City now also believes that Threadneedle Street will cut interest rates to 3.5% by April, with a 78% chance of a cut to 3.25% by November next year.

Meanwhile, the ECB kept interest rates steady at 2.15%, capping off the year as anticipated with unchanged guidance for bank borrowing costs. The bank last cut rates at its May meeting.

Read more: ECB leaves key interest rate unchanged at 2.15%

The deposit facility rate — the interest rate banks receive for making overnight deposits with the ECB — also remained at 2%.

The bloc also raised its growth forecasts from what it set out in September. Growth is expected to be “driven especially by domestic demand,” it said.

Growth has been revised up to 1.4% in 2025, 1.2% in 2026 and 1.4% in 2027 and is expected to remain at 1.4% in 2028.