The consumer price index for January accelerated 2.4% from the same time a year ago, but down 0.3 percentage point from the previous month, the Bureau of Labor Statistics reported Friday.
CNBC reported that the figure pulled the inflation rate down to where it was the month after President Donald Trump in April 2025 announced aggressive tariffs on U.S. imports.
Excluding food and energy, the core CPI was up 2.5%. Economists surveyed by Dow Jones had been looking for an annual rate of 2.5% for both readings.
Housing costs rose just 0.2% for the month, bringing the annual increase down to 3%. The shelter category makes up more than one-third of the CPI.
On a monthly basis, the all-items index was up a seasonally adjusted 0.2% while core gained 0.3%, the Bureau of Labor Statistics said. The forecast had been 0.3% for both, CNBC noted.
Food Prices Rise
Elsewhere, food prices increased 0.2% as five of the six major grocery group categories posted gains, the report said. Energy fell 1.5% while vehicle prices also were muted, CNBC said, with new vehicles up just 0.1% and used cars and trucks falling 1.8%.
Stock market futures were little changed after the report, while Treasury yields moved lower.
“Headline CPI inflation was a touch softer than expected in January, delivering a welcome surprise to the downside at the beginning of the year,” Bernard Yaros, Lead Economist at Oxford Economics, said in a note, according to Yahoo Finance.
“In recent years, residual seasonality, along with delayed price adjustments in response to pandemic-era shocks, have led to upside CPI surprises in January,” Yaros said. “These were no longer on full display this time around, further reinforcing our view than tariff-induced price increases on the goods side are largely behind us.”
Heather Long, Chief Economist at Navy Federal Credit Union, said the report was positive.
“This is great news on inflation,” Long said. “Inflation fell to the lowest level since May and key items such as food, gas, and rent are cooling off. This will provide much-needed relief for middle-class and moderate-income families.”
Interest Rate Cuts
CNBC reported that the lower-than-expected reading helped boost the outlook for Federal Reserve interest rate cuts in the futures market, and it adds to a mixed economic picture.
At the macro level, CNBC reported that the U.S. shrugged off a slow start in 2025 and has been barreling forward since, with fourth-quarter growth pegged at 3.7%, according to the latest update from the Atlanta Fed’s GDPNow, a running tracker of incoming data.
Inflation has continued to be above the Fed’s 2% annual target even with generally contained energy prices, CNBC said. Moreover, Fed officials continue to express concern about the labor market, which added only 15,000 jobs a month last year, the network noted.
Consumer spending held up fairly well last year, although it was unexpectedly flat heading into the holiday season.
CNBC said that economists had expected President Donald Trump’s tariffs to spark inflation, but the impact has been largely tilted toward select goods rather than a broader impact.
“The tariffs have had a clear impact on products such as furniture and appliances, but the key items in many family budgets are cooling off,” Long said.
With the conflicting economic signals, the Fed is widely expected to stay on hold until June after a rate-cutting cycle that saw three reductions in the latter part of 2025, CNBC said.
Shifting Dynamic
The network said that the Fed faces shifting dynamics this year, with a rotating cast of regional presidents that seems tilted toward a more aggressive posture on fighting inflation and a chair-designate, Kevin Warsh, who is likely to push for lower rates.
On Thursday, Treasury Secretary Scott Bessent told CNBC that he sees an “investment boom” acting as a tailwind while inflation gets back to the Fed’s target “in the middle of this year.”
“We’ve got to get away from this idea that growth automatically has to be tampered down, because growth, per se, is not inflationary,” Bessent said. “It’s growth that leaks into areas where there’s not sufficient supply, and everything this administration is doing is creating more supply.”
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