CPI report shows inflation cooled in January, with prices rising at a 2.4% annual pace

The Consumer Price Index rose 2.4% in January from a year ago, below economists’ forecasts and a sign that price pressures across the U.S. are easing. 

By the numbers

The CPI was expected to rise 2.5% on an annual basis last month, according to economists polled by financial data firm FactSet. The January CPI represents the slowest pace of inflation since May 2025 and is down from December’s 2.7% annual rate.

The CPI tracks the changes in a basket of goods and services typically bought by consumers, such as food and apparel. The January inflation reading was delayed due to the partial government shutdown that ended earlier this month.

Food and shelter costs climbed at a faster pace than the overall January CPI rate, but were partially offset by a 7.5% annual decline in gasoline prices.

Foods like ground beef and coffee remain a sore spot, rising 17.2% and 18.3%, respectively. By contrast, egg prices — which soared during the pandemic as the avian flu decimated poultry flocks — continue to ease and are down more than 34% from a year ago. 

So-called core inflation — which excludes volatile food and energy prices — rose 2.5% over the past 12 months, the lowest level since March 2021.

Cost-of-living pressures

A decline in price pressures will provide relief to many consumers, who report feeling weighed down by the rising cost of living.

Recent CBS News polling shows millions of Americans still feel under the gun financially, struggling to afford essential goods like shelter and utilities. People with money invested in the stock market, which has increased 12% over the last year, tend to have a more favorable view of their finances.

Consumers’ perception of inflation is more likely to be influenced by the prices they encounter on store shelves or their monthly bills, which are distinct from the rate of change in prices that the CPI measures.

“I think that it’s going to take, unfortunately, a number of years for wages to continue to grow and outpace inflation to the point where people feel again like they have the breathing room that they remember from a few years ago,” said Stephen Kates, a financial analyst for Bankrate, before Friday’s CPI release.

The Trump administration’s tariffs, which research shows were largely passed onto customers in the form of higher prices, have had a weaker impact on inflation than initially feared, as evidenced by the economy’s strong performance in 2025.

Remaining price pressures are likely to come from people having more money in their pockets due to tax refunds, lower interest rates and an increase in business investment, according to Kates.

“Those are things that could be keeping inflation sticky more so than the tariffs, simply because a lot of that has already been phased in,” he said.

What the inflation data means for a Fed rate cut

Today’s CPI reading shows that inflation is cooling, moving closer to the Federal Reserve’s 2% target rate. Still, experts say the central bank is likely to hold off on issuing another cut.

“With core inflation at an almost four‑year low and the Fed’s 2% target finally within reach, this is a reassuring print for markets,” Seema Shah, chief global strategist at Principal Asset Management, said in an email. “For the Fed, however, it still falls short of justifying near‑term rate cuts.”

Wall Street analyst Adam Crisafulli, head of Vital Knowledge, said in a research note Friday that he expects the Fed to next cut interest rates at its meeting in June.