US inflation held steady in December at a slightly cooler pace than the start of 2025 – as President Trump ramps up pressure on the Federal Reserve to keep slashing interest rates.
Prices for everyday necessities like food, shelter and medical care marched higher, though missing data due to the government shutdown left the report murkier than usual.
The Consumer Price Index rose 2.7% in December over the past 12 months – the same as last month’s report, as expected, the Bureau of Labor Statistics said Tuesday.
Core CPI – which excludes volatile food and energy prices – rose 2.6% on a yearly basis.
The headline and core figures saw a 0.3% and 0.2% monthly increase, respectively.
While prices have not fallen, the pace of inflation slowed over 2025 from 3% in January. The White House has eased its onslaught of tariffs since earlier this year, so most companies have already passed tariffs along to consumers or have continued to absorb the bulk of added costs.
Analysts said the report will likely bring relief to Fed officials, who have been concerned about keeping high inflation under control as they try to stimulate the labor market with rate cuts.
“After cutting rates three times in the fall of 2025, the Fed is likely to take its time and absorb more data, especially given the noise we’ve seen in the recent data as a result of the government shutdown,” Skyler Weinand, chief investment officer at Regan Capital, said in a note Tuesday.
“Recent positive employment data, elevated inflation, sticky price levels and political noise will keep the Fed at bay through at least the Spring.”
The Trump administration has only ramped up its pressure on the Fed to slash interest rates at a quicker pace, with the Justice Department launching a criminal investigation into Fed Chair Jerome Powell.
That interest-rate agenda is part of President Trump’s focus on affordability ahead of midterm elections after consumers reported heightened economic anxiety this year.
Just over the past week, he has demanded oil companies invest in Venezuelan oil to lower gas prices, ordered $200 billion worth of mortgage bond buying and issued a one-year cap on credit card interest rates at 10%.
In December’s inflation report, some categories appeared more resistant to the president’s tariffs than others.
Food jumped 0.7% in December – its largest one-month gain since 2022. The category is up 3.1% over the year.
There were some bright spots, like egg prices, which slumped 8.2% over the month as flocks continued to recover from bird flu outbreaks across the country.
But beef and veal prices rose 1% in December – up 16.4% over 2025 – due largely to shrinking cattle herds.
Medical care services and shelter each rose 0.4% over the month. Those categories are up 3.5% and 3.2%, respectively, over the year.
Household furnishings, a highly tariff-sensitive category, increased 4% over the year – though it dipped 0.5% in December.
Bedroom furniture, in particular, rose 1.4% in December, while living room, kitchen and dining room furniture fell 1.3%.
Apparel saw a 0.6% monthly increase. It is also up 0.6% over the year.
Footwear – which is largely imported from Vietnam and China – rose 1.1% in December.
Yet appliances fell 4.3% over the month.
There might still be some distortions in the data after the government shutdown halted data collection throughout October. Analysts have said it could take another month or two before reports normalize.
Hiring in December was muted, while the unemployment rate fell to 4.4% – though this was largely dismissed by analysts as noise in the data, according to the jobs report last week.
The Federal Reserve is widely expected to keep interest rates in the current 3.5% to 3.75% range at its Jan. 28 meeting, according to CME FedWatch.
