The United States saw its annual inflation rate ease to 2.7% at the close of 2025, offering relief yet remaining well above the Federal Reserve’s long-term goal. According to the latest figures, the December year-over-year Consumer Price Index (CPI) increase mirrored November’s, aligning with economists’ forecasts, and down from 2.9% recorded in December 2024.
Data published Friday resolved uncertainty caused by a government shutdown earlier in the year, which had disrupted data collection and delayed several economic indicators for October. The new report has shed light on late-year price movements.
Core inflation, which excludes the more erratic food and energy categories, registered a 2.6% annual rise in December. This figure was in line with the previous month and slightly lower than economists’ projections, which anticipated a 2.7% upswing.
Both the headline and core measures were expected to climb by 0.3% month-over-month. Headline CPI met these expectations, showing a 0.3% uptick—matching figures from September, the last month for which such data was previously available. Core CPI saw a more modest 0.2% gain, echoing its September performance.
Labor market data released last week painted a picture of a cooling job market. The US labor force grew by 584,000 new positions in 2025, marking a slowdown from prior years. While the unemployment rate remained historically low at year-end, it edged higher compared to 2024.
These economic updates come ahead of the Federal Reserve’s upcoming policy meeting scheduled for January 27-28, where officials are set to consider recent data in determining their next interest rate move. Market participants largely anticipate that policymakers will leave rates unchanged, following three straight cuts prior to year-end. CME FedWatch showed a 95% probability of a rate pause in the wake of the inflation report.
