U.S. Inflation Eases to 2.4% as Rent and Gas Cool
CPI rose about 0.2%–0.3% in January and annual CPI fell to 2.4% while core CPI hit 2.5%, easing pressure on rates and raising prospects for Fed rate cuts.
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Overview
The consumer price index rose about 0.2% to 0.3% in January and was up 2.4% from a year earlier, down from 2.7% in December, the Bureau of Labor Statistics said.
Slower apartment rent growth and falling gasoline prices helped pull annual inflation down while core CPI, which excludes food and energy, slowed to 2.5% from 2.6%.
Economists including Luke Tilley said the deceleration could enable more Federal Reserve rate cuts, while Cleveland Fed President Beth Hammack warned that "inflation is still too high," and firms are passing tariffs to consumers.
Consumer prices remain about 25% higher than five years earlier, used car prices and gasoline fell, and a Federal Reserve Bank of New York study found companies and consumers are paying nearly 90% of tariff costs.
Most economists forecast inflation will decline further later this year and move closer to the Fed's 2% target by the end of 2026.
Analysis
Center-leaning sources frame January CPI as a welcome turn toward lower inflation, emphasizing outsized positives (lowest nine-month reading, cooler grocery and gas prices) in headlines and leads while relegating caveats (core stickiness, PCE above target, labor-market revisions) to later paragraphs — using upbeat descriptors and selective emphasis to shape optimism.
FAQ
The consumer price index rose about 0.2%–0.3% in January, with annual CPI at 2.4%, down from 2.7% in December.
Core CPI excludes food and energy and slowed to 2.5% from 2.6% in December.
Slower apartment rent growth and falling gasoline prices contributed to the decline in annual inflation.
The Federal Reserve maintained the target range for the federal funds rate at 3.5%–3.75% in its January 2026 meeting.
Forecasts vary, with some expecting one to three rate cuts in 2026, potentially starting in June, while the Fed projects just one 25-basis-point cut.
