US CPI rose +0.2% MoM and +2.4% YoY in January (down from +2.7% YoY), reflecting softer headline inflation driven by volatile components.

• Headline CPI increased +0.2% MoM (vs +0.3% expected), and the YoY rate slowed to +2.4% from +2.7% in December, marking the lowest since April 2025 and near the bottom of its post-2022 range.

• Food prices rose +0.2% MoM (down from +0.7% MoM in December), with food at home +0.2% MoM, the slowest since July 2025, and food away from home +0.1% MoM, indicating limited price pressure despite broad grocery increases.

• Energy fell -1.5% MoM, driven by energy goods -3.3% MoM, including gasoline -3.2% MoM and -7.5% YoY; energy services rose +0.2% MoM, with utility gas services +1.0% MoM, but had a small overall impact.

• Core CPI increased +0.3% MoM and +2.5% YoY (down from +2.6% YoY), the lowest annual core rate since March 2021, as goods remained soft while services strengthened.

• Core goods were flat (0.0% MoM) for a second month, with the YoY rate at +1.1% (lowest since June 2025); transportation goods fell -0.7% MoM, including used cars and trucks -1.8% MoM (largest since January 2024), while medical care goods declined -0.1% MoM and prescription drugs were -0.5% YoY.

• Core services rose +0.4% MoM (largest since July 2025), with shelter +0.2% MoM and stronger gains in transportation services +1.4% MoM, other personal services +1.6% MoM, recreation +0.4% MoM, and education & communication +0.4% MoM; airfare jumped +6.5% MoM and internet services +1.8% MoM (largest ever).

• Excluding energy, food, used vehicles, and shelter, CPI rose +0.5% MoM, the largest increase since September 2022, suggesting firmer price pressures in smaller segments despite a cooler headline.

• Core goods 3Mo3M annualized growth slowed to +0.4% (from around +2.5% in Q3 2025), indicating limited evidence of tariff-related inflation pressures in imported goods categories.

US CPI increased +0.3% MoM and +2.7% YoY in December, while core CPI rose +0.2% MoM and +2.6% YoY, showing steady headline inflation alongside continued cooling in underlying price pressures.

• Headline CPI matched expectations, with the +2.7% YoY rate unchanged from November and consistent with mid-2025 readings, as offsetting moves in food and energy kept the top line stable.

• Food rose +0.7% MoM, the largest monthly increase since October 2022, driven by food at home +0.7% MoM (highest since August 2022) with broad grocery strength (5 of 6 major indexes rising); “other food at home” +1.6% MoM stood out, led by items like fats & oils (+1.8% MoM) and spices/condiments/sauces (+1.9% MoM).

• Food away from home also increased +0.7% MoM, matching the strongest monthly gain since October 2022 and adding to the breadth of food-related inflation in the month.

• Energy rose a more modest +0.3% MoM, as utility natural gas services +4.4% MoM (largest since January 2023) was offset by gasoline -0.5% MoM (NSA gasoline index -5.3% MoM) and electricity -0.1% MoM, limiting overall energy pressure.

• Core CPI undershot expectations, with the downside surprise attributed mainly to weaker goods inflation, while services remained firmer; the +2.6% YoY core rate was described as the lowest since March 2021, reinforcing a broader cooling trend.

• Core goods were flat (0.0% MoM), the weakest since May 2025, as gains in household goods (+0.5% MoM) and apparel (+0.6% MoM) were offset by declines in transportation goods (-0.3% MoM) and education & communication goods (-2.0% MoM).

• Vehicle prices were a key drag on core goods, with new vehicles 0.0% MoM and used cars & trucks -1.1% MoM (largest decline since July 2024), reinforcing the role of autos in recent core disinflation.

• Core services rose +0.3% MoM, the strongest since August, led by shelter +0.4% MoM (also hottest since August) and a sharp rise in lodging away from home +2.9% MoM (strongest since September 2023); other notable increases included medical care services +0.4% MoM, transportation services +0.5% MoM, and recreation services +1.8% MoM (largest on record).

• CPI excluding food, energy, used vehicles, and shelter rose +0.2% MoM and +2.3% YoY, which is only slightly above the Fed’s 2% target, supporting the view that underlying pressures were not accelerating.

• There continues to be limited evidence of tariffs creating a broad inflation pickup: while household goods and apparel rose strongly in December, the 3-month annualized core goods inflation rate fell to 1.1%, the lowest since June, suggesting the near-term trend is turning down.

After months of concern that inflation pressures were proving stubborn, this CPI release forces a rethink of the near term narrative. The report points to a broad cooling in underlying price momentum, with the most persistent categories finally showing signs of relief, even as volatility in headline components complicates the signal. At the same time, unusual data gaps introduce a layer of uncertainty that makes it difficult to separate genuine disinflation from statistical distortion. The result is a report that looks decisively softer on the surface, but one that both markets and policymakers are likely to treat with caution until a more complete picture emerges.

CPI

According to an odd-looking CPI report with spotty data, the November annual inflation rate was 2.7% YoY, down from the September annual rate of 3.0% YoY and well below expectations of a slight uptick to 3.1% YoY. This brings the CPI inflation rate in line with where it was earlier this July and reverses the reinflation trend that we have seen since April. More importantly, today’s inflation report shows core CPI inflation at 2.6% YoY, the lowest it has been since March 2021.

Unfortunately, with no MoM data for October and November, we must rely on the changes in the annual inflation rates to analyze the details of the report. Let’s first look at the volatile components and see how they affected the movement in the headline rate.

• Food inflation was measured at 2.6% YoY in November, significantly slower than the 3.1% YoY increase in September. It appears that almost all of the disinflation came from the food at home index, which slowed from 2.7% YoY to 1.9% YoY. Five of the six grocery subcategories saw lower YoY inflation, including the dairy products segment, which moved to -1.6% YoY, the weakest since March 2024.
• Offsetting some of the weakness in the food segment was energy, where the annual inflation rate accelerated from 2.8% YoY in September to 4.2% YoY in November, the highest since February 2023. We do happen to have monthly rates for the largest energy subindex, gasoline, and that data shows some volatility across October and November, falling -2.1% MoM in the former month and rising 3.0% MoM in the latter. The strongest driver of energy inflation over the last two months looks to be electricity, which accelerated from 5.1% YoY in September to 6.9% YoY in November (highest since April 2023), pushing energy services inflation up to 7.4% YoY.

It is hard to tell exactly what happened over the last two months, given the lack of data, but it seems that within the volatile components, there was a strong disinflationary impulse in the food segment. The 2-month change from September to November for this component was just 0.06% or about 0.03% MoM over the last two months. This would be the weakest monthly rates since food prices dropped in April.

Core CPI

The focus of the November CPI report will be on the strong disinflationary trend in the core CPI rate, which dropped to 2.6% YoY, down from 3.0% YoY in September and the lowest it has been since March 2021. The implied 2-month change in the core CPI index comes out to 0.16% or roughly 0.08% MoM over the last two months. This would be the lowest monthly pace since March, and the lowest 2-month rate since around 2017. Additionally, this would be a sudden and significant slowdown from the average monthly pace in Q3 2025 of 0.30% MoM. Let’s look at what data we do have on the core subindexes.

• Other than gasoline, we do have a monthly value for new and used car prices in October, so monthly rates for October and November were provided. New vehicle prices increased just 0.1% MoM in October and 0.2% MoM in November, while used vehicle prices were slightly hotter at 0.7% MoM and 0.3% MoM, respectively. Notably, both saw lower annual rates and contributed to a slight disinflationary trend in core goods inflation.
• Core goods inflation eased slightly from 1.5% YoY in September to 1.4% YoY in November. As just mentioned, auto price movement was muted, which restricted the volatility in the core goods segment. The changes in the annual rates in the other core goods subsegments were mixed: household furnishings eased from 3.0% YoY to 2.6% YoY, apparel edged up from -0.1% YoY to 0.2% YoY, and medical care goods increased from 0.7% YoY to 1.1% YoY (which happens to be the largest since February).
• Core services inflation saw a more significant deceleration from 3.5% YoY in September to 3.0% YoY in November, the lowest annual rate since September 2021. This was almost entirely driven by shelter inflation slowing from 3.6% YoY to 3.0% YoY, the lowest since August 2021. The cooling of price pressures did extend to the smaller services segments as every core services subsegment saw disinflation over the last two months, except for education & communication services. This is demonstrated by the fact that core services (ex rent of shelter) inflation eased from 3.7% YoY in September to 3.5% YoY in November.

Indeed, the above charts demonstrate just how sharp a shift there was in the momentum of core services inflation. The short-term measure, which looks at the annualized 3Mo3M rate, dropped to 1.6% in November, the lowest since February 2021. When this is combined with core goods price pressures falling away and a downside surprise in food inflation, we end up with much lower than expected headline and core CPI inflation rates. However, this report comes with a major caveat since the BLS admits that the government shutdown caused significant disruptions to data collection, and therefore, calls into question some of the trends.

For example, it appears that the BLS “just assumed that rent/owner’s equivalent rent (OER) was zero for October,” according to a post by Nick Timiraos. This would’ve put major downward pressure on the headline and core annual rates since shelter is such a large component of the calculation. I also find the sudden shift in food inflation to be jarring, from averaging around 0.37% MoM in Q3 2025 to a 2-month average of around 0.03% in October and November. If we remove shelter and food from CPI (which, admittedly, is removing around 50% of the components), the annual rate only fell from 2.6% YoY in September to 2.5% YoY in November.

September’s inflation report delivered a familiar but mildly encouraging picture. Headline gains were lifted by volatile components, while underlying price pressures continued to ease. Core categories cooled further, hinting that tariff-related inflation may be proving short-lived, and services inflation, especially housing, continued its gradual slowdown. Overall, the data reinforce the view that price growth is normalizing, keeping the Fed comfortable with its current easing path.

CPI

US CPI comes in a bit below expectations in September, rising 0.3% MoM and 3.0% YoY, which is slightly below the expected gains of 0.4% MoM and 3.1% YoY. While the gains were below the consensus estimates, the annual rate was still higher than the 2.9% YoY rate recorded in August and the highest since the first month of this year. The volatile components have played a part in pushing the headline inflation rate higher since it dipped to a near-term low in April.

• The general food index increased 0.2% MoM in September, a significantly cooler reading than the 0.5% MoM reading in August. The food at home subsegment increased 0.3% MoM, outpacing the 0.1% MoM increase in food away from home (which was that index’s smallest gain since February 2024). Grocery prices continued to tick higher with 4/6 of the grocery subindexes rising in September, including cereal & bakery products up 0.7% MoM and meats, poultry, fish & eggs up 0.3% MoM. On an annual basis, food prices are up 3.1% YoY, and the food at home index is up 2.7% YoY.
• The general energy index jumped 1.5% MoM in September, the largest monthly rate so far this year. The gain was driven by an increase in gasoline prices that was stronger than the seasonal norms. The not seasonally adjusted increase was 1.1% MoM, but after seasonal adjustment, it was 4.1% MoM. This was mostly caused by the unusual trend of soft gas price gains over the summer, which meant that there was no decline seen in September. Electricity (-0.5% MoM) and natural gas prices (-1.2% MoM) dampened the impact of the rise in gas prices. Importantly, the general energy index is now up 2.8% YoY, the highest since May 2024, which means that the segment has become an upward force on the headline annual rate relative to core inflation.

Core CPI

Core inflation also came in below expectations in September, printing at 0.2% MoM and 3.0% YoY, below the consensus estimates of 0.3% MoM and 3.1% YoY. This seems like the more important result of the report, as it suggests that price pressures from tariffs in September have come in below what was expected. The monthly increase of 0.2% MoM is a decline from the 0.3% MoM prints in July and August, and it led to a slight deceleration in the annual rate from 3.1% YoY in August. Both core goods and core services posted smaller monthly gains than the month before, supporting the narrative that tariff inflation is transitory.

• Core goods prices increased 0.2% MoM in September, down from 0.3% MoM in August. Within the segment, there were mixed results among the subgroups. The softer areas, transport goods (0.0% MoM), medical care goods (-0.1% MoM), household goods (+0.2% MoM), and education & communication goods (-0.7% MoM), helped to offset the larger increases in apparel (+0.7% MoM), recreation goods (+0.4% MoM), and other goods (+0.8% MoM). The key used car (-0.4% MoM) and new vehicles (+0.2% MoM) indexes remained contained after looking a bit hotter in the last two months.
• Some of the September data could be interpreted as showing some tariff-related inflation pressures. This is most evident in nondurable consumer goods segments like apparel (+0.7% MoM), sporting goods (+1.0% MoM), personal care products (+0.7% MoM), and pet supplies (+1.0% MoM). Additionally, even though the prices of cars and vehicles didn’t post a notable gain, the auto parts & equipment subindex increased 0.5% MoM and is up 3.1% YoY.
• Core services prices increased 0.2% MoM in September, the lowest since May 2025, suggesting a significant cooling from what was seen over the summer. The shelter index was only up 0.2% MoM, and a softer print here is always going to keep the overall shelter gain contained. All other services subsegments came in with monthly gains between 0.1% MoM and 0.4% MoM, with the largest rise seen in recreation services. On an annual basis, the aggregated core services index was up 3.5% YoY, the smallest since November 2021.
• As just mentioned, the shelter index was up just 0.2% MoM, as the index continues its gradual cooling. This lagging segment continues to post new lows in its annual rates. Specifically, the rent index was up 3.5% YoY, the lowest since October 2021, and the owners’ equivalent rent index was up 3.8% YoY, the lowest since December 2021.

In general, the inflation data in September told a story similar to the data that we saw over the summer. Core goods inflation, which was the first to decline following the COVID inflation spike, is contending with tariff-based inflationary pressures, while core services inflation, which has been stickier following the COVID inflation spike, is gradually declining as wage growth cools and consumers feel less secure in the current economy. Indeed, the commodities index (which does include energy) was up 1.9% YoY in September, the highest since April 2023, and the services index (also including energy) was up 3.6% YoY, the lowest since October 2021.

The downside surprises today were a result of that tariff-related impulse being weaker than expected in September, especially when compared to July and August. Although there are still pockets of upward price pressure, especially in consumer goods categories. That being said, the new tariff threats against China could create a more sustained increase in core goods inflation if they are realized.