Inflation slows in January, Consumer Price Index shows
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The Consumer Price Index rose 2.4% in the year through January, the government said on Friday.
Why it matters: Inflation eased notably last month, despite warnings that businesses are passing tariff costs to consumers.
By the numbers: CPI fell from 2.7% in December to the slowest pace since May 2025 after President Trump announced a raft of tariffs on goods.
- Core CPI, a closely watched measure that strips out volatile food and gas costs, rose 2.5%, down from 2.6% the prior month — the lowest since 2021.
Zoom in: On a monthly basis, inflation still looks benign. CPI rose by 0.2% in January, ticking down from the 0.3% pace the previous month.
- There was a notable drop in energy prices (-1.5%) last month. Used car and truck prices fell by almost 2%.
- Apparel prices rose by 0.3%, matching the prior month's pace.
- Shelter prices, which have been sticky in recent years, rose at a slower pace last month: rising 0.2%, half the pace seen the prior month.
- Core CPI, meanwhile, picked up slightly: rising by 0.3% last month, compared with the 0.2% increase in December.
The intrigue: By one measure, consumer sentiment plummeted to the lowest level in 12 years last month as Americans grow more frustrated with high prices.
- Trump's trade policies have piled on the pressure, with a slew of imported goods subject to some of the highest tariffs in a century. Select items have seen steep price increases relative to a year ago.
- That's especially true for groceries, where price increases are particularly salient for consumers. Beef prices, for example, are up 15% compared with a year ago, while coffee costs are up 18%.
- The administration is reportedly considering rolling back some levies on aluminum and steel products, the Financial Times reported — the latest easing to address affordability concerns.
- A study from the New York Fed this week showed that roughly 90% of the tariff burden has been paid by U.S. companies and consumers last year.
What to watch: The Federal Reserve paused a string of interest rate cuts last month. Fed chair Jerome Powell noted that inflation was still too high for comfort, but added the overshoot largely stemmed from tariff impacts in the goods sector.
- Some Fed officials say rates need to stay elevated for now to keep a lid on inflation, "otherwise I believe there is a real risk that inflation will get stuck closer to 3% than 2% in the long run," Kansas City Fed president Jeff Schmid said in a speech this week.
Editor's note: This article has been updated with details from the CPI report.
