Inflation Eases to 2.4% as Lower Energy and Housing Costs Offset Firmer Core Prices

January data show softer headline inflation driven by declining gasoline and moderating rent increases, while core prices remain elevated.

By yourNEWS Media Newsroom

U.S. consumer price growth slowed more than expected in January, helped by falling energy prices and moderating housing costs, though underlying inflation pressures showed signs of firmness.

The Consumer Price Index rose 0.2 percent in January after increasing 0.3 percent in December, according to the Labor Department’s Bureau of Labor Statistics. Economists surveyed by Reuters had projected a 0.3 percent monthly increase.

On a year-over-year basis, CPI increased 2.4 percent in the 12 months through January, down from 2.7 percent in December. The moderation largely reflected higher readings from early last year dropping out of the annual comparison.

Energy prices were a significant factor in January’s softer headline reading. The overall energy index fell about 1.5 percent, with gasoline prices down roughly 3.2 percent during the month. At the same time, housing-related costs—including rent and owners’ equivalent rent—rose at a slower pace than in recent months, easing overall inflation pressure.

Excluding volatile food and energy categories, core CPI rose 0.3 percent in January after a 0.2 percent increase in December. On an annual basis, core CPI increased 2.5 percent, down from 2.6 percent the prior month.

Economists have noted that core CPI readings have tended to exceed expectations in January, citing seasonal adjustment factors that may not fully account for price increases commonly implemented at the start of a new year. The Bureau of Labor Statistics published recalculated seasonal adjustment factors with the January report to reflect updated 2025 pricing patterns.

Some analysts attribute part of January’s firm core reading to one-time price adjustments and potential pass-through effects from tariffs imposed by President Donald Trump. Economists have also pointed to last year’s 7.4 percent decline in the trade-weighted U.S. dollar, which may contribute to higher import prices.

The January CPI release was slightly delayed following a three-day federal government shutdown. A longer shutdown last year disrupted price collection for October, leading to volatility in subsequent reports. Economists had expected that volatility to ease in January’s data.

The Federal Reserve targets 2 percent inflation as measured by the Personal Consumption Expenditures Price Index, a separate gauge that remains above target. The central bank left its benchmark overnight interest rate unchanged last month in a range of 3.50 percent to 3.75 percent.

Additional economic data released this week showed that job growth accelerated in January and the unemployment rate declined to 4.3 percent from 4.4 percent in December. A stabilizing labor market, combined with moderating headline inflation and firm core readings, may allow the Federal Reserve to maintain current interest rate levels in the near term.

Some economists expect inflation to strengthen later this year, citing tariff-related costs and currency movements as potential upward pressures on prices.