Key Takeaways
- CPI (All Items): +0.4% MoM, +2.9% YoY
- Core CPI (ex Food & Energy): +0.3% MoM, +3.2% YoY
- Shelter Inflation: +0.3% MoM, +4.6% YoY
- Energy: +2.4% MoM
Analysis
The Consumer Price Index for December 2025, released January 15, 2026, showed inflation remains elevated above the Federal Reserve's 2% target. The headline CPI rose 0.4% month-over-month and 2.9% year-over-year, both slightly above consensus expectations.
Core Inflation Still Sticky
Core CPI, which excludes volatile food and energy components, increased 0.3% for the month, bringing the annual rate to 3.2%. This is the same year-over-year pace as November, indicating that underlying inflation pressures remain persistent.
Shelter Costs Continue to Drive Inflation
Housing costs, which make up roughly one-third of the CPI basket, rose 0.3% in December. The year-over-year increase of 4.6% continues to be the primary driver keeping core inflation elevated.
| Component | MoM Change | YoY Change | Weight |
|---|---|---|---|
| Shelter | +0.3% | +4.6% | 36.2% |
| Food | +0.2% | +2.1% | 13.5% |
| Energy | +2.4% | +0.5% | 6.9% |
| Medical Care | +0.3% | +3.1% | 8.5% |
| Transportation | +0.5% | +1.2% | 15.2% |
Energy Prices Rebound
Energy prices rose 2.4% in December, driven primarily by higher gasoline prices (+4.4%). This followed two months of declines and contributed to the stronger-than-expected headline reading.
Services vs Goods
The inflation divergence between services and goods continues:
- Services: +0.4% MoM, +4.4% YoY
- Goods (less food & energy): -0.1% MoM, -0.5% YoY
Goods deflation has been a helpful offset to persistent services inflation, largely driven by normalized supply chains and strong dollar effects.
Fed Policy Implications
Today's report reinforces the Federal Reserve's cautious stance on rate cuts. With core inflation still running well above the 2% target, officials are likely to maintain the current policy rate through at least the first quarter of 2026.
Fed Chair Powell has emphasized the need for "sustained progress" on inflation before considering rate reductions. December's data suggests that progress has stalled.
Market Reaction
- 10-Year Treasury Yield: +5 bps to 4.72%
- S&P 500 Futures: -0.4%
- Dollar Index: +0.3%
Looking Ahead
Key inflation data to watch:
- PPI (January 16): Producer price pressures
- PCE Price Index (January 31): Fed's preferred inflation measure
- February CPI (March 12): January inflation data
Data sourced from the Bureau of Labor Statistics via FRED. Analysis represents the views of MarketCharts.ai Research and is for informational purposes only.