The consumer price index rose 0.3% from November to December and 2.7% over the last year, the Bureau of Labor Statistics announced Tuesday.
Excluding volatile food and fuel prices, the core measure of inflation rose 0.2% on a monthly basis and 2.6% on an annual basis.
The topline results for both core and topline inflation over the previous 12 months matched the November numbers, easing worries that inflationary pressure was rising in the wake of the government shutdown in October and part of November.
The latest data indicate that inflation remains modestly but stubbornly above the Federal Reserve’s 2% target rate, with many analysts highlighting the tariffs imposed by President Trump over the last year as an important factor in the persistence of inflationary pressure throughout the economy.
Housing costs were the largest factor in the December results, with shelter prices rising 0.4% during the month, the largest increase since August, and 3.2% over the year. Overall food prices rose 3.1% in 2025, while grocery prices specifically rose 2.4% — a larger annual increase than in 2023 or 2024. Coffee prices continued to climb, rising 1.9% from month to month and 20% over the year.
White House reacts: President Trump celebrated the report, claiming it shows “Great (LOW!) Inflation numbers for the USA.” He also used the occasion to renew his call for Fed Chair Jerome Powell to cut interest rates — an obsession for Trump as his administration launches a highly unusual criminal investigation of the central bank chief.
“Powell should cut interest rates, MEANINGFULLY!!!” Trump wrote on his social media platform. “If he doesn’t he will just continue to be, ‘TOO LATE!’”
Speaking to reporters outside the White House, Trump again cited problems with renovations of the Fed headquarters buildings in Washington as he cast aspersions on Powell’s performance. “He's billions of dollars over budget. So, he either is incompetent or he’s crooked,” Trump said, referring to the building project that is the focus of the Justice Department’s criminal investigation. “That jerk will be gone soon,” he said in his speech in Detroit, as we noted above.
What analysts are saying: Many economists welcomed the December numbers, seeing them as a sign that the worst of the tariff-driven inflation may be over.
“In a year where there was an incredible amount of angst related to tariffs and the potential for upward pressure on that, we’re finishing the year in a more benign stance than where we started,” said Tom Porcelli, chief economist at Wells Fargo, per The Wall Street Journal.
Michael Pearce, chief U.S. economist at Oxford Economics, made a similar point. “Distortions caused by the government shutdown have made the inflation data harder to interpret, but the recent run of figures suggests inflation has peaked,” Pearce wrote in a note to clients. “We think tariff-driven price rises have mostly been passed through and anticipate further disinflation in services in 2026 will drive inflation back closer to the 2% target by the end of the year.”
Still, not everyone is convinced that the threat of inflation reheating is over. RSM Chief Economist Joseph Brusuelas said the economic numbers are still distorted by the government shutdown, and “top-line and core data will most likely move higher as the noise fades” over the next few months.
Brusuelas also expects economic growth to pick up as fiscal stimulus from the Republican tax cuts kicks in, which could push inflation higher even in the absence of tariff-related pricing pressure.
The bottom line: Inflation is holding steady, but the outlook is uncertain as analysts weigh the potential effects of tariffs and growth. That suggests that central bank officials will have little reason to cut interest rates again over the next few months, and investors expect rates to hold steady at least until the Fed meeting in June.
