US Inflation Shows Signs of Cooling in December 2025: Monthly Headline Inflation Reached 0.3%

US consumer prices increased at a slower pace in December, offering fresh evidence that inflationary pressures are easing as the Federal Reserve assesses its next interest rate move.

Core Inflation Undershoots Expectations

The core Consumer Price Index (CPI), which excludes volatile food and energy prices, rose 0.2% month-on-month and 2.6% year-on-year, the Bureau of Labour Statistics said on Tuesday (January 13). Both figures were 0.1 percentage points below market expectations. The 2.6% annual rise marked the slowest pace of core inflation since March 2021.

Headline CPI Holds Steady

On a headline basis, the all-items CPI climbed 0.3% during the month and 2.7% from a year earlier, matching both November’s readings and economists’ forecasts. Monthly headline inflation came in at 0.3%, while core prices increased 0.2%, compared with expectations of a 0.3% rise for both measures.

Data Collection Factors in Focus

Economists cautioned that earlier inflation readings may have been influenced by data-collection issues. Most November prices were recorded in the second half of the month, after the government reopened, coinciding with the start of holiday discounting. In addition, incomplete rental price data in October prompted the use of provisional estimates in November, which may have weighed on inflation figures.

Inflation Trend Remains Stable

Despite these distortions, December’s report indicates that inflation remained unchanged even after incorporating more comprehensive data. Consumer prices rose 2.7% year-on-year in December, the same pace as in November, while core inflation held steady at 2.6%.

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Federal Reserve officials are widely expected to leave interest rates unchanged at their upcoming meeting, following three consecutive rate cuts toward the end of 2025. Policymakers remain divided on the path ahead, balancing concerns that tariffs could keep price pressures elevated against signs of softening in the labour market.

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