US CPI data for January released; Inflation cools while core CPI rises as expected

The US CPI data for January 2026 has been released by the Bureau of Labor Statistics today. The annual inflation rate in the US slowed to 2.4% in January 2026, marking its lowest level since May, down from 2.7% in each of the previous two months and below forecasts of 2.5%.

The all-items index rose 2.4 percent for the 12 months ending January, after rising 2.7 percent for the 12 months ending December. The all items less food and energy index rose 2.5 percent over the last 12 months.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent on a seasonally adjusted basis in January. The index for all items less food and energy rose 0.3 percent in January, slightly above December’s 0.2% rise.

It was the sharpest increase since August of the previous year, with two reports being suspended since then due to the federal government shutdown. Prices rose sharply for transportation services (1.4% vs 0.4% in December 2025). In turn, inflation slowed for shelter (0.2% vs 0.4%), while deflation picked up for used cars and trucks (-1.8% vs -0.9%).

The index for shelter rose 0.2 percent in January and was the largest factor in the all-items monthly increase. The food index increased 0.2 percent over the month, as did the food at home index, while the food away from home index rose 0.1 percent. These increases were partially offset by the index for energy, which fell 1.5 percent in January.

The index for all items less food and energy rose 0.3 percent in January. Indexes that increased over the month include airline fares, personal care, recreation, medical care, and communication. The indexes for used cars and trucks, household furnishings and operations, and motor vehicle insurance were among the major indexes that decreased in January.

US equity futures erased their slight losses on Friday as the US inflation rate refrained from surprising to the upside. The three main indices were muted, holding yesterday’s sharp selling pressure on AI companies.

With US inflation showing signs of cooling down, the next FOMC meeting on March 17-18 will be an interesting event to watch.

The debate centers on whether the US Federal Reserve should aggressively cut rates now, as signs of a weakening labor market emerge, or delay to ensure inflation is fully controlled, thus preventing a resurgence.

Currently, markets expect the US Fed to remain in the wait-and-watch mode until July. However, the March US FOMC meeting will reveal the dot-plot and economic projections from Fed members, providing insights into future rates.

There are other emerging threats to inflationary pressures in the economy that the US Fed may not want to ignore. The tax cuts from the ‘One Big, Beautiful Bill Act’ will soon take effect, increasing economic activity. Also, the additional stimulus from the Fed’s recent rate cuts, which reduced borrowing costs, may lead to some stickiness in prices.