While the Federal Reserve is expected to cut its key interest rate next week, stubborn inflation could pressure the central bank to keep rate cuts few and far between next year.

Inflation is moving in the wrong direction. U.S. inflation picked up for a second straight month in November on a rise in food and gasoline prices, underscoring that the final stretch of the Federal Reserve's two-year battle against sharply rising prices has become more challenging.

The market sees the probability of another 25 basis point interest rate cut at next week's Federal Reserve meeting as rising despite inflation ticking higher in November.