CPI report shows inflation cooled in January, with prices rising at a 2.4% annual pace
The consumer price index rose 2.4% in January from a year ago, lower than economists forecast and a sign that price pressures are easing in the United States.
By the numbers
The CPI was expected to rise 2.5% on an annual basis last month, according to economists surveyed by financial data firm FactSet. January’s CPI represents the slowest pace of inflation since May 2025 and is down from The annual rate of 2.7% in December.
The CPI tracks changes in a basket of goods and services typically purchased by consumers, such as food and clothing. January inflation figures were delayed due to the partial government shutdown that ended earlier this month.
Food and shelter costs rose at a faster pace than the overall CPI rate in January, but were partially offset by a 7.5% annual decline in gasoline prices.
Foods like ground beef and coffee remain a hot spot, up 17.2% and 18.3%, respectively. On the other hand, egg prices, which have risen during the pandemic while avian flu has decimated poultry flocks — continue to decline and are down more than 34% compared to a year ago.
So-called core inflation – which excludes volatile food and energy prices – increased by 2.5% over the past 12 months, the lowest level since March 2021.
Cost of living remains an issue
A reduction in price pressures will bring relief to many consumers, who say they feel burdened by the rising cost of living.
Recent CBS News Poll shows that millions of Americans still feel financially strained, struggling to afford essentials like housing and utilities. People whose money is invested in the stock market, which has risen 12% over the past year, tend to have a more favorable view of their finances.
Consumers’ perceptions of inflation are more likely to be influenced by the prices they encounter on store shelves or by their monthly bills, which are distinct from the rate of price change measured by the CPI.
“I think it will unfortunately take several years for wages to continue to grow and outpace inflation to the point where people again feel like they have the wiggle room that they remembered from a few years ago,” Stephen Kates, a financial analyst for Bankrate, said ahead of Friday’s CPI release.
The Trump administration’s tariffs, which research shows were largely passed on to customers in the form of higher prices, had a lower impact on inflation than initially feared, as evidenced by the economic situation strong performance in 2025.
Remaining price pressures will likely come from people having more money in their pockets thanks to tax refunds, lower interest rates and increased business investment, according to Kates.
“These are things that could keep inflation higher than tariffs, simply because a lot of these measures have already been phased in,” he said.
What CPI data means for interest rates
The latest CPI figure shows inflation moving closer to the Federal Reserve’s 2% annual target. Nonetheless, experts say the central bank should refrain from cutting short-term interest rates to minimize the risk of economic growth overheating.
“With underlying inflation at its lowest level in almost four years and the Fed’s 2% target finally within reach, this is a reassuring number for markets,” Seema Shah, chief global strategist at Principal Asset Management, said in an email. “For the Fed, however, this is still not enough to justify a short-term rate cut.”
Recent data points to solid economic growth, reducing the need for a Fed rate cut. The country’s gross domestic product grew at a rate robust annual rate of 4.3% in the third quarter, the strongest growth in two years.
The labor market also remains healthy, with employers adding a stronger contribution than expected. 130,000 jobs in January, according to employment figures published at the start of the week.
Wall Street analyst Adam Crisafulli, principal at Vital Knowledge, said in a research note Friday that he expects the Fed to cut interest rates at its June meeting.
