Inflation cooled more than expected in January

• January's inflation rate was 2.4%, a cooler rate than the 2.5% forecast and the previous 2.7%.
• The report was slightly delayed due to the partial government shutdown.
• The new report follows the jobs report that showed a strong January after a difficult year.

Americans' wallets are ringing in the new year with a little relief from rising prices. The US started 2026 with a slower inflation rate than at the end of 2025.

The consumer price index, an inflation measure, increased 2.4% in January from a year ago, the smallest increase since last May and below the 2.7% increase in both November and December. Economists expected a year-over-year increase of just 2.5%.

Core CPI, which excludes volatile food and energy prices, rose 2.5% year over year in January, as expected, just below the previous 2.6% increase.

Energy prices fell 0.1% over the year. Gasoline fell 7.5%, but natural gas rose 9.8%. The shelter index increased 3% over the year, and the food index rose 2.9%. Prices of used cars and trucks fell 2%, while new-vehicle prices increased 0.4%.

CPI increased 0.2% over the month, just below December's 0.3% increase and the forecast of 0.3%. Meanwhile, core CPI increased 0.3% over the month, matching the forecast and just above December's 0.2% rise.

"Inflation came in as expected, but markets are breathing easier as price pressures remain contained despite very strong labor market data earlier this week and the risk of further tariff pass‑through," Seema Shah, chief global strategist at Principal Asset Management, said in commentary.

The Bureau of Labor Statistics released its rescheduled jobs report on Wednesday, due to the partial government shutdown, which showed the US added fewer jobs in 2025 than previously reported but better job growth this past January than expected. Unemployment fell in January from December as labor force participation ticked up.

"The 181,000 jobs that were added across 2025 really starkly show how challenging the labor market was and how little movement on either side there really has been as both employers and workers were stuck in place and clinging to stability," Nicole Bachaud, an economist at ZipRecruiter, told Business Insider.

Federal Open Market Committee members held interest rates steady in their first decision of the year in January. CME FedWatch showed a roughly 90% chance after the new inflation report that the Fed would hold rates steady in their meeting next month, similar to where those odds stood before the release.

"Friday's delayed CPI for January was muted and in-line with expectations and it won't increase the likelihood of a rate cut within the next few months largely because of Wednesday's blowout employment numbers, which threw ice cold water on any hopes of a near-term rate cut," Skyler Weinand, chief investment officer of Regan Capital, said in commentary.

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