News & Insights

In January, consumer prices increased 0.2% from December and 2.4% over the year, down from the 2.7% annual rise in December and less than the anticipated 2.5% hike. Core CPI, which excludes more volatile energy and food prices, rose 0.3% from December and 2.5% over the year, down from the 2.6% 12-month increase in December and the slowest pace since March 2021.

Energy costs edged down 0.1% over the year in January, after rising 2.3% year-over-year in December. Within the energy index, gasoline prices declined 7.5% over the year, while fuel oil prices fell 4.2%. Meanwhile, electricity prices increased 6.3% year-over-year, and natural gas prices surged 9.8%.

In January, food prices grew 2.9% over the year, after increasing 3.1% year-over-year in December, while prices for food at home advanced 2.1%. Meanwhile, prices for food away from home climbed 4.0% from January 2025, down from the 4.1% year-over-year increase in December. Of the different food groups, beef and veal and coffee continue to rise at the fastest pace, soaring 15.0% and 18.3% over the year, respectively.

The shelter index grew 0.2% from December and 3.0% over the year, the greatest factor in the all-items monthly increase but down from the 3.2% annual gain in December. Meanwhile, prices for used cars and trucks decreased 1.8% over the month and 2.0% over the year, while new vehicle prices inched up 0.1% over the month and 0.4% from January 2025. Relatedly, prices for motor vehicle maintenance and repair jumped 4.9% year-over-year.

Although the headline inflation rate is still above the Federal Reserve’s target of 2.0%, it has moderated back closer to 2025 lows. Federal Reserve officials held their interest rate target steady at their January meeting, and markets anticipate that the Federal Open Market Committee will keep its interest rate target unchanged again at next month’s meeting. Risks to the Federal Reserve’s employment and inflation mandates remain elevated but appear to be easing.