December CPI Core Pace Below Forecast
BLS December CPI held steady while core undershot forecasts; shelter gains and data-collection gaps cloud the Fed policy outlook and market pricing.
KEY TAKEAWAYS
- Headline CPI was 2.7% year-over-year while core CPI was 2.6% year-over-year.
- BLS cited missing Oct-Nov data from the appropriations lapse that biases shelter lower through Apr 2026.
- Shelter inflation was the principal monthly driver with a 0.4% month and 3.2% annual rise.
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The Bureau of Labor Statistics on Jan. 13, 2026, released the December 2025 Consumer Price Index (CPI), showing a steady year-over-year headline reading while core CPI, which excludes food and energy, came in below some forecasts. This mix alters expectations ahead of the Federal Reserve's Jan. 27–28 meeting.
December Inflation and Data Collection Impact
The BLS reported the seasonally adjusted CPI for all urban consumers (CPI-U) rose 0.3% month-over-month and 2.7% for the 12 months ending December 2025, matching November’s annual pace. Core CPI increased 0.2% monthly and 2.6% annually, slightly below consensus forecasts of 0.3% monthly and 2.7% annually. The agency noted, "The all items index rose 2.7 percent for the 12 months ending December, the same increase as over the 12 months ending November. The all items less food and energy index rose 2.6 percent over the last 12 months."
Shelter inflation was the main contributor to the monthly rise. The shelter index increased 0.4% month-over-month and 3.2% year-over-year, with owners' equivalent rent and rent each up 0.3% monthly. The BLS warned that data collection for October and November 2025 was incomplete due to an appropriations lapse, which will bias shelter and related categories lower through April 2026.
Other categories showed mixed movements. The food index rose 0.7% monthly and 3.1% annually, with food at home and food away from home each up 0.7% monthly and 2.4% and 4.1% annually, respectively. The energy index increased 0.3% month-over-month and 2.3% annually. Gasoline declined 0.5% monthly and 3.4% annually, with an unadjusted monthly drop of 5.3%. Utility gas jumped 4.4% monthly and 10.8% annually, while electricity eased 0.1% monthly but remained 6.7% higher year-over-year. The CPI-U index level stood at 324.054 (1982–84=100) for December.
Policy Context Ahead of Federal Reserve Meeting
Core personal consumption expenditures (PCE), the Federal Reserve’s preferred inflation gauge, has remained above the central bank’s 2% target for 55 months. Despite this, the Fed cut interest rates three times in late 2025. The December CPI figures, combined with the data-collection caveat, will factor into the Fed’s deliberations at its Jan. 27–28 meeting.
