US Inflation Cooled to 2.4% in January
What happened
The U.S. Consumer Price Index eased to 2.4% year-over-year in January, down from 2.7% in December and marking the lowest annual rate since May 2025. On a monthly basis, prices rose 0.3%, partly due to seasonal price adjustments. Inflation for services, particularly shelter and medical costs, remains persistent.
Why it matters
- Core inflation, which strips out volatile food and energy prices, eased to 2.5% on an annual basis, down from 2.6% in December. - The data comes after the Federal Reserve paused its rate-cutting trend at its January 2026 meeting, holding the benchmark interest rate in a range of 3.5% to 3.75%. - A key contributor to the cooling headline inflation was a 1.5% monthly decrease in the energy index. - In response to the report, federal funds futures contracts began pricing in a higher probability of a rate cut at the Fed's March or May meetings. - The January inflation reading was delayed due to a partial government shutdown that affected the data collection and release schedule. - The Producer Price Index (PPI), which measures inflation at the wholesale level, rose 3.0% year-over-year in December; the January PPI data is scheduled for release on February 27, 2026. - While the CPI is closely watched, the Fed's primary inflation gauge for its 2% target is the Personal Consumption Expenditures (PCE) Price Index. - The report follows a strong January jobs report, which saw the addition of 130,000 nonfarm payrolls and a decrease in the unemployment rate to 4.3%.
Key numbers
- Consumer Price Index eased to 2.4% year-over-year in January, down from 2.7% in December and marking the lowest annual rate since May 2025.
- On a monthly basis, prices rose 0.3%, partly due to seasonal price adjustments.
- - Core inflation, which strips out volatile food and energy prices, eased to 2.5% on an annual basis, down from 2.6% in December.
- The data comes after the Federal Reserve paused its rate-cutting trend at its January 2026 meeting, holding the benchmark interest rate in a range of 3.5% to 3.75%.
What happens next
- In response to the report, federal funds futures contracts began pricing in a higher probability of a rate cut at the Fed's March or May meetings.
- The Producer Price Index (PPI), which measures inflation at the wholesale level, rose 3.0% year-over-year in December; the January PPI data is scheduled for release on February 27, 2026.
- While the CPI is closely watched, the Fed's primary inflation gauge for its 2% target is the Personal Consumption Expenditures (PCE) Price Index.
Quick answers
What happened in US Inflation Cooled to 2.4% in January?
The U.S. Consumer Price Index eased to 2.4% year-over-year in January, down from 2.7% in December and marking the lowest annual rate since May 2025. On a monthly basis, prices rose 0.3%, partly due to seasonal price adjustments. Inflation for services, particularly shelter and medical costs, remains persistent.
Why does US Inflation Cooled to 2.4% in January matter?
Core inflation, which strips out volatile food and energy prices, eased to 2.5% on an annual basis, down from 2.6% in December. The data comes after the Federal Reserve paused its rate-cutting trend at its January 2026 meeting, holding the benchmark interest rate in a range of 3.5% to 3.75%. A key contributor to the cooling headline inflation was a 1.5% monthly decrease in the energy index. In response to the report, federal funds futures contracts began pricing in a higher probability of a rate cut at the Fed's March or May meetings. The January inflation reading was delayed due to a partial government shutdown that affected the data collection and release schedule. The Producer Price Index (PPI), which measures inflation at the wholesale level, rose 3.0% year-over-year in December; the January PPI data is scheduled for release on February 27, 2026. While the CPI is closely watched, the Fed's primary inflation gauge for its 2% target is the Personal Consumption Expenditures (PCE) Price Index. The report follows a strong January jobs report, which saw the addition of 130,000 nonfarm payrolls and a decrease in the unemployment rate to 4.3%.
