The costs of goods and services in the United States grew at a slower rate than expected in January, according to the U.S. Bureau of Statistics.
The consumer price index (CPI) for January rose 2.4% from a year ago and pulled the inflation rate down to where it was the month after President Donald Trump announced aggressive tariffs on U.S. imports in April 2025.
Excluding food and energy, the core CPI increased 2.5%, the lowest level since 2021.
Economists were looking for an annual rate of 2.5% for both readings.
This also comes as a new poll shows voters souring on Trump’s economic record.
The data also showed that prices rose 0.2% from December to January, and the core CPI went up 0.3% over the month.
Shelter accounted for much of the CPI gain but still only increased by 0.2% for the month, bringing the annual increase down to 3%. This category makes up more than one-third of the CPI.
Food prices increased 0.2% as five of the six major grocery categories posted gains and airline fares grew 6.5%.
On the other hand, energy fell 1.5%, and vehicle prices were muted, with new vehicles up just 0.1% and used cars and trucks falling 1.8%.
Egg prices dropped 7% and are now down 34% over the past year after a meteoric surge.
Stock market futures were little changed after the report, while Treasury yields moved lower.
Wall Street has been watching this inflation report closely to estimate its potential impact on interest rates.
This comes as the Federal Reserve held off on a rate cut last January, and it remains unclear which direction the central bank is leaning before its next board meeting in March.
Last month, the Fed chair, Jerome Powell, noted that Trump’s tariffs were still passing through the economy, though he expects they will cause a one-time increase in prices before settling into a new normal.
“The expectation is that we will see the effects of tariffs flowing through goods prices, peaking, and then starting to come down,” Powell said.
“That’s what we expect to see over the course of this year.”
The Fed also continues to express concerns about the labour market, which added only 15,000 jobs a month last year.
Consumer spending held up fairly well last year but was unexpectedly flat heading into the holiday season.
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