WASHINGTON–New inflation data that show prices increased more slowly in January than expected could ease the way for additional rate cuts by the Fed in 2026, according to analysts and a credit union economist.
Consumer Price Index data for the year’s first month show that overall inflation eased to 2.4 %, down from the previous 2.7% annual pace. “Core” inflation, which filters out volatile food and energy prices, ticked down to 2.5% on a year-over-year basis. It last stood at 2.6%.
““Inflation slowed in January, beating expectations. Prices increased 2.4% year over year, a reading historically consistent with the Federal Reserve’s 2% target for its preferred inflation measure,” said America’s Credit Unions Chief Economist Dawit Kebede. “Muted price growth in the coming months, despite solid economic growth would clarify the path for rate cuts. Markets raised the probability of a third rate cut this year following the release. Credit unions offer affordable loans to members under all monetary policy conditions.”
While there continue to be concerns over the long-term effects of President Trump’s tariffs on the economy, the New York Times noted in its analysis that the latest inflation data, released by the Bureau of Labor Statistics, offered some relief to those concerned about how sticky price pressures may prove to be and came in below economists’ forecasts.
Inflation by Category
The BLS data show food price rose in January, but only modestly. Energy prices fell 1.5% alongside costs associated with used cars and trucks and car insurance. That helped to offset increases in other categories like airfares, which rose 6.5% last month. Services related to personal care rose 1.2%, while those for recreational activities rose 0.5%d, according to the CPI report.
Housing costs, which make up roughly a third of the overall index, rose just 0.2% for the month, while the metric tracking the rental cost of owned housing was up 3.3% compared to the same time last year.
