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Inflation remained elevated in January as the pace of consumer price growth stayed above the Federal Reserve’s target rate as policymakers weigh affordability concerns.

The Bureau of Labor Statistics on Friday said that the consumer price index (CPI) – a broad measure of how much everyday goods like gasoline, groceries and rent cost – rose 0.2% on a monthly basis in January and trended down to 2.4% on a year-over-year basis. That was down slightly from 2.7% in December.

Expectations vs. reality

Both figures were slightly cooler than the expectations of economists polled by LSEG, who predicted a 0.3% monthly gain and 2.5% increase from a year ago.

So-called core prices, which exclude volatile measurements of gasoline and food to better assess price growth trends, were up 0.3% from the prior month and slowed to 2.5% from a year ago from a reading of 2.6% last month. Those figures were in line with economists’ expectations.

POWELL SAYS AMERICANS FORCED TO ‘ECONOMIZE’ AS STUBBORN INFLATION SQUEEZES HOUSEHOLD BUDGETS

Economists have noted that inflation data from December 2025 through April 2026 will be affected due to data collection interruptions resulting from last fall’s 43-day government shutdown. 

Due to the shutdown, the BLS wasn’t able to gather data and used a carry-forward methodology to make up for the lack of an October CPI report and missing data in November’s report. Going forward, economists say that is likely to impart a downward bias on inflation data until this spring, when fresh data will negate the discrepancy.

Customers look over food items displayed on August 16, 2024 at the Costco branch in Colchester, Vermont.  (Robert Nickelsberg/Getty Images / Getty Images)

The cost of living breakdown

High inflation has created severe financial pressures in recent years for most U.S. households, which are forced to pay more for everyday necessities like food and rent. Price hikes are particularly difficult for lower-income Americans, because they tend to spend more of their already-stretched paychecks on necessities and have less flexibility to save.

Food prices increased 0.2% in January and are 2.9% higher than a year ago. The food at home index was up 0.2% for the month and is 2.1% higher than last year, while the food away from home index rose 0.1% in January and is 4% higher than a year ago.

Meats, poultry and fish prices rose 0.7% in January and were 7% higher than a year ago. Beef and veal prices declined 0.4% in the month but are up 15% from last year. Egg prices continued to decline following an avian flu outbreak that impacted supply, with prices down 7% for the month and 34.2% year over year. The fruits and vegetables index was up 0.1% on a monthly basis and is up just 0.8% from last year.

BEEF PRICES IN FOCUS AS TRUMP SIGNS ORDER AIMED AT CONSUMER RELIEF

Energy prices declined 1.5% for the month and are down 0.1% over the last year. Gasoline prices fell 3.2% for the month and are down 7.5% year over year. Utility gas service prices rose 1% in January and are up 9.8% from last year, while electricity costs declined 0.1% for the month but are up 6.3% year over year.

Housing prices rose 0.2% in January and are up 3% on an annual basis. The BLS noted that the increase in the shelter index was the largest factor in the overall CPI increase in January. Tenants’ and household insurance costs declined 0.1% in January but have risen 6.9% from last year.

Transportation services costs were up 1.4% in January and are 1.3% higher than a year ago. Airline fares jumped 6.5% for the month and are up 2.2% from last year. Motor vehicle maintenance and repair costs are 4.9% higher than last year after a 0.1% increase in January.

Airline fares saw a notable jump in the January CPI inflation data. (Reuters)

Medical care costs were up 0.3% in January and have risen 3.9% in the last year. The personal care index, which includes haircuts and similar services, was up 0.6% in January and is 5% higher than a year ago.

The index for household furnishings and supplies rose 0.3% in January and is up 3.8% from a year ago. Furniture and bedding costs were up 0.7% on a monthly basis and 4% year over year. Tools, hardware and supplies were up 1% in January and are 6.4% higher than a year ago.

WHO IS KEVIN WARSH, TRUMP’S PICK TO SUCCEED JEROME POWELL AS FED CHAIR?

Expert analysis

Bernard Yaros, lead economist at Oxford Economics, said that, “Headline CPI inflation was a touch softer than expected in January, delivering a welcome surprise to the downside at the beginning of the year.”

“The downside surprise in the January CPI is welcome news for the Federal Reserve, but we aren’t changing the baseline forecast for monetary policy based on one inflation reading. Lingering distortions from the shutdown in the price data, prospects for solid growth this year, and a stabilizing job market will keep the central bank on hold until June,” Yaros added.

Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management, said of the January CPI report, “Trust the groundhog. The Fed’s path to ‘normalization’ cuts appears clearer now with fears of a strong January print behind us with CPI coming in cold!” 

“How short or how long that path is, however, will depend on whether employment continues to show signs of improvement, given the FOMC’s sensitivity to labor market weakness. We continue to expect two cuts this year, with the next move coming in June,” Rosner said.

FED HOLDS INTEREST RATES STEADY, PAUSING RATE CUTS AMID ECONOMIC UNCERTAINTY

Federal Reserve Chair Jerome Powell signaled the central bank was in a good place to monitor economic data ahead of its next interest rate move. (Photo by Liu Jie/Xinhua via Getty Images)

What does it mean for Fed rate cuts?

The Federal Reserve held rates steady at its most recent meeting in January after three consecutive cuts of 25 basis points to end 2025. The next meeting of the Federal Open Market Committee (FOMC), the central bank panel that sets monetary policy, will be March 17-18. 

Despite the downward trend, the January CPI readings remained well above the Fed’s long-run 2% target rate and uncertainty stemming from the shutdown-related data disruptions will factor into rate cut decisions, likely leading to a continued pause.

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The market expects rates to remain unchanged in March, with the CME FedWatch tool showing a 92.3% chance of rates holding steady – up from 81.6% a week ago and 72.9% a month ago. It also shows a 71.3% probability of rates holding steady at the Fed’s late April meeting, with a 50.6% chance of a 25 basis point cut in June.

A better-than-expected January inflation report sparked a market rebound Friday, reinforcing optimism that easing price pressures could give the Federal Reserve more flexibility on interest rates in the months ahead.

The Consumer Price Index rose 0.2% month over month in January, below expectations for a 0.3% increase. On an annual basis, headline inflation came in at 2.4%, also under forecasts. The data immediately lifted equity markets as investors re-calibrated expectations for the path of inflation and monetary policy.

Former TD Ameritrade Chairman and CEO Joe Moglia told “Mornings with Maria” that the CPI report confirmed growing evidence that inflation is cooling at a pace supportive of economic growth. Moglia noted that a year-over-year reading near 2.4% and a softer monthly figure would be “good for us… Especially with the jobs numbers that we saw on Wednesday.”

ENERGY GIANT BETS BIG ON US, SAYS ITS ELECTRICITY MARKET ‘HOTTEST’ IN THE WORLD

New York Stock Exchange with American flag. (robertcicchetti / Getty Images)

Energy prices played a central role in the downside surprise. Gasoline prices declined during the month, helping offset continued increases in shelter and food costs. That energy-driven relief has become an increasingly important factor in keeping overall inflation from re-accelerating, even as certain producer-level prices remain elevated.

Moglia said that combination of moderating inflation and resilient employment could make it easier for the Federal Reserve to begin cutting rates earlier than markets currently anticipate.

“All of these… Help the Fed have reasons to wind up cutting maybe prior to what they normally would have done,” he told Maria Bartiromo.

Moglia added that market reactions hinged heavily on how the inflation data compared with expectations.

“If it’s a good number, I think we’re going to see rally in the market,” he said, noting that the inflation reading could influence how quickly policymakers adjust rates.

INFLATION EASED SLIGHTLY IN JANUARY BUT REMAINED WELL ABOVE THE FED’S TARGET

Markets reacted swiftly to the data, reversing earlier losses as investors interpreted the report as evidence that inflation is moving closer to the Fed’s target without undermining economic momentum. The January CPI release now shifts attention to upcoming inflation indicators, including producer prices, for confirmation that the disinflation trend remains intact.

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Democratic Gov. Gavin Newsom is taking a direct shot at the Trump administration, expanding a state mortgage relief program to $100,000 per household while accusing the White House of “turning its back” on California fire survivors. 

On Thursday, Newsom announced that disaster-affected homeowners now qualify for a full 12 months of mortgage payment relief, a significant increase from the previous three months, with a total increase to $100,000.

The maximum assistance per household skyrocketed from the original $20,000. According to a state press release, the funds are non-repayable grants with payments going directly to mortgage providers.

To date, $6.5 million has allegedly been paid to 793 recipients, primarily from the Palisades and Eaton fires, leaving a significant portion of the fund’s $1 billion budget still available.

CALIFORNIA RESIDENTS FACE BRUTAL CHOICE ONE YEAR AFTER LOS ANGELES FIRES DESTROYED THEIR LIVES

Gov. Newsom’s office did not immediately respond to Fox News Digital’s request for comment.

Gavin Newsom, governor of California, attends the 62nd Munich Security Conference Feb. 13, 2026. (Kay Nietfeld/picture alliance via Getty Images)

The move signals an aggressive shift by Sacramento to bypass a stalled federal disaster package and provide direct cash infusions to high-income homeowners.

In a press release, Newsom also called President Trump’s response a “lie” and a “disgrace” as the state moves to fill a perceived federal aid gap.

“We’ve been on the ground, listening and adjusting to meet people’s evolving needs. That’s why we’re expanding this program — to close the gap between relief and long-term recovery and make sure folks get the help they need to move forward,” Newsom said.

But federal officials at the Small Business Administration and White House argue that $3.2 billion in federal loans are already approved but are being blocked by California’s “local permitting backlogs” and “red tape.”

SBA Administrator Kelly Loeffler previously called California’s state and local permitting backlog a “nightmare” that has dragged out wildfire recovery.

“With President Trump’s leadership and alongside EPA, the SBA is opening an expedited path to recovery for every borrower who has been held hostage by the bureaucracy of Gavin Newsom and Karen Bass,” Loeffler said.

Though the Palisades and Eaton fires were contained by the end of January 2025, the Los Angeles County Economic Development Corporation reports that they caused up to $53.8 billion in property damage alone.

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The department’s research also found extraordinarily high destruction rates, with the Palisades Fire destroying 56.3% of all assessed structures and 55.8% of single-family homes. The Eaton Fire destroyed about 50% of all structures and single-family homes.

Additionally, more than 160 lending institutions have already agreed to offer 90-day forbearance extensions beyond the legally required 12 months; and the state has pushed to use rebuilding funds to incentivize “all-electric” homes, costing anywhere from $3,000 to $10,000 less than mixed-fuel homes but aligning with California’s climate mandates.

READ MORE FROM FOX BUSINESS

Fox News’ Amanda Macias contributed to this report.

Americans are getting some relief from lower gasoline prices, which the latest inflation data from the Labor Department shows have declined substantially over the last year.

The Bureau of Labor Statistics on Friday released the consumer price index (CPI) for January, which showed headline inflation was up 2.4% from a year ago, while core CPI, which excludes volatile measurements of food and energy, was up 2.5% in that period.

Energy prices fell 1.5% in January and have been largely flat over the last year, down just 0.1% in that period, with much of the downward pressure coming from falling gas prices.

The index for all types of gasoline showed prices fell 3.2% in the month of January and are down 7.5% in the last year, according to the BLS data.

INFLATION EASED SLIGHTLY IN JANUARY BUT REMAINED WELL ABOVE THE FED’S TARGET

Gas prices have declined over the last year, helping household budgets. (Justin Sullivan/Getty Images)

The U.S. Energy Information Administration and Federal Reserve showed the average price of gas nationwide was $2.90 a gallon as of Feb. 10. 

On that date last year, gas was $3.13 a gallon, which represents a decline of about 7.3%, roughly in line with the January CPI data.

The latest CPI inflation data showed relief in other categories of energy as well. 

CALIFORNIA ‘TRULY AT A BREAKING POINT,’ STATE SENATOR SAYS AS REFINERIES CLOSE AND GAS PRICES SURGE

Propane, kerosene and firewood costs declined 1.5% on a monthly basis and were down 7.9% from a year ago.

The price of fuel oil fell 5.7% in January and has decreased 4.2% over the last year.

While gas prices and those categories of energy have provided relief to consumers, other types of energy have seen prices surge, undercutting some of that relief.

TRUMP CONSIDERS CAPPING STATE GAS TAX, SIGNALS POSSIBLE RELIEF FOR CALIFORNIANS

Gasoline prices fell in January, according to the latest consumer price index data. (Al Drago/Bloomberg via Getty Images)

Electricity prices were little changed on a monthly basis and fell 0.1% on a monthly basis, but are up 6.3% in the last year.

Utility gas service costs jumped 1% in January and are 9.8% higher than last year, a substantial price hike for households relying on gas to help heat their homes this winter.

Raymond James Chief Economist Eugenio Aleman said in a note that the “picture for February’s CPI will probably be very different than January’s as energy prices are probably going to show positive prints.” 

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“However, we don’t expect increases in transportation services prices to remain as strong during the month, and, thus, inflation’s behavior will probably depend on how strong the reversal in energy prices was in February and what happens to shelter prices during the month,” he added.

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of ALNY either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.