CPI report shows inflation rose at a 2.7% annual pace in December, in line with forecasts
The consumer price index rose at an annual rate of 2.7% in the final month of 2025, in line with economists’ forecasts, capping a year in which many Americans felt squeezed by price pressures.
By the numbers
The CPI was expected to rise 2.6% on an annual basis last month, according to economists surveyed by financial data firm FactSet.
The CPI tracks changes in a basket of goods and services typically purchased by consumers, such as food and clothing.
The latest CPI figure closes a year marked by economic resilience alongside persistent price pressures. Inflation remained at or below 3% throughout 2025, well below the pandemic peak of 9.1% reached in June 2022.
Despite this, the CPI climbed for several months in 2025 following the Trump administration’s decision. price announcementsalthough the levies did not boost inflation to the extent that some economists had predicted. The impact of tariffs on inflation was more limited than expected, as many retailers swallowed some tariff costs rather than transmitting them directly to customers.
However, the slowdown in inflation has not translated into a fall in prices. Prices have continued to rise, leaving many households feeling squeezed and complicating efforts to save for retirement or buy a house.
“Inflation remains a challenge, with core PCE inflation holding above the Federal Reserve’s 2% target for 55 months,” noted Seema Shah, chief global strategist at investment firm Principal Asset Management, in a Tuesday email.
The Federal Reserve cut rates three times in the final months of 2025 to counter a slowing labor market, even though inflation remains above the central bank’s 2% target. Fed Chairman Jerome Powell said labor market challenges outweighed the risk of further price pressures. The next Fed meeting is scheduled for January 27-28.
