JANUARY 20, 2026 – – ANNUAL INFLATION AT 2.7 PERCENT
The final 2025 inflation report was released last week showing consumer prices were up 2.7 percent year-over-year, meeting expectations. This is down from 2.9 percent in December 2024. The monthly rise for December was 0.3 percent, while core inflation fell from 3.2 percent a year ago, to 2.6 percent now.
Inflation eased over the course of 2025, but the data was impacted by the government shutdown in the fourth quarter. The trend suggests inflation peaked as the effects of the tariffs have worked their way through the economy, with experts believing inflation will continue to move down towards the Fed’s 2 percent target. Consumers polled are less optimistic, thinking inflation in 2026 will be in the 3 to 4 percent range
It is unlikely the Fed will move on rates at their meeting next week. While 2.7 percent is well above the Fed’s target, the unemployment rate in December declined slightly, reducing the urgency to cut rates to shore up the labor market. It is unlikely any movement in rates will happen for months. The Fed will wait and see what the data brings before acting.