U.S. Inflation Cools in January as Gas Prices Drop
January CPI rose 0.2% monthly and 2.4% year-over-year as gasoline fell 7.5% and shelter inflation slowed, spurring market gains and renewed Fed scrutiny.
Overview
The Consumer Price Index rose 0.2% in January and was up 2.4% year over year, below economists' forecasts, the Bureau of Labor Statistics said.
Lower gasoline prices and slower shelter inflation helped pull down the report, with gasoline down 7.5% year over year and shelter rising 3%, the BLS said.
Equity markets rallied after the softer-than-expected reading, and some analysts said easing inflation could give the Federal Reserve more flexibility on interest rates.
Core CPI, which excludes food and energy, rose 2.5% year over year, while energy prices fell 1.5% in January and were down 0.1% over the last year, the BLS said.
Economists noted the Fed will weigh this report against other indicators, including the PCE gauge that remains nearly 3%, and upcoming producer-price data for confirmation of the trend.
Analysis
Center-leaning sources frame January CPI as cautiously optimistic, leading with upbeat headlines and emphasizing below-expectation readings, falling gas and grocery prices, and housing slowdowns. Editorial choices favor optimistic expert quotes and numbered takeaways up front, while caveats (data distortions, sticky core inflation, tariffs) are deferred to later paragraphs, softening the upbeat narrative.
Sources (22)
FAQ
The Consumer Price Index rose 0.2% monthly and 2.4% year-over-year in January 2026, below economists' forecasts.
Inflation cooled due to a 7.5% year-over-year drop in gasoline prices and slower shelter inflation at 3%, along with base effects from higher prior-year readings.
Core CPI excludes food and energy; it rose 2.5% year-over-year in January 2026.
Equity markets rallied following the softer-than-expected inflation reading.
Easing inflation provides the Fed more flexibility on interest rates, though it will consider other indicators like PCE near 3% and upcoming producer-price data.
History
9 sources