Inflation cooled by more than expected to start the year, providing relief to American households still feeling the burden of high prices after the Biden administration ushered in the worst increase in four decades.
The consumer price index climbed 0.2 percent in January compared with the final month of last year. Compared with the start of 2025, prices are up 2.4 percent.
Economists had forecast a rise of 0.3 percent for the month and 2.5 percent over the past year.
Core consumer prices, a measure that excludes food and energy, rose 0.3 percent in January. Over the past 12 months, core prices are up 2.5 percent. Both figures were in line with expectations. That is the lowest annual core inflation reading since March 2021, just before the Bidenflation surge.
Recent economic data has been coming in better than expected. This week, the Department of Labor said the economy added 130,000 workers in January, more than twice as many as economists had forecast, and the unemployment rate fell to 4.3 percent.
The prices of goods excluding food and energy were flat for the month, just as they were in December. Compared with a year ago, core goods are up just 1.1 percent.
Gasoline prices fell 3.2 percent in January and are down 7.5 percent from a year ago. Electricity prices fell 0.1 percent, bringing the annual increase to 6.3 percent.
Medicinal drug prices dropped 0.1 percent and prescription drug prices were flat. Compared with a year ago, prescription drug prices are down 0.7 percent, fulfilling a key promise of the Trump administration.
Used car prices fell 1.8 percent, the second consecutive month of declining prices, and are down two percent from January of last year. New vehicle prices rose just 0.1 percent after being flat in December. From a year ago, prices of cars and trucks are up just 0.4 percent. Car insurance prices fell 0.4 percent.
Prices of major appliances fell 0.7 percent and are up two percent from a year ago. Washers and dryers saw a price rise, climbing 2.6 percent, partially reversing December’s 4.6 percent decline. From a year ago, however, laundry equipment prices are down 0.3 percent.
Grocery prices rose 0.2 percent, a slowdown in food inflation from the prior month. Compared with a year ago, grocery prices are up 2.1 percent. Beef prices, which rose very fast last year, declined 0.4 percent, bringing the year-over-year increase to 15 percent. Egg prices fell seven percent and are down 34.2 percent from a year ago.
Restaurant prices were flat for the month. The broader measure of food away from home rose 0.1 percent.
The shelter index, which includes rents and an equivalent measure of the cost of homeownership, rose 0.2 percent, a mild level of inflation.
Most of the inflation in January was on the core services side, where the overall index climbed 0.4 percent. Prices of core services are up 2.9 percent from a year ago.
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