Key inflation measure hits lowest level in nearly five years

The US Consumer Price Index showed annual inflation slowed to 2.4% in January, down from 2.7% in December, and core inflation also eased to 2.4%, the lowest core reading in nearly five years.

The US Consumer Price Index for January showed a further slowdown in inflation, with both headline and core rates easing. This follows a period of unusually high price increases since 2020 that pushed overall consumer prices roughly 25% above their pre-pandemic level. Economists and commentators have pointed to factors such as cooling rental costs, lower gas prices in January, slower wage growth and data irregularities last autumn as contributors to the recent readings. The trend is being watched for how it might affect expectations about future interest rate moves. Key facts: - Annual headline inflation slowed to 2.4% in January, down from 2.7% in December. - Month-to-month prices rose 0.2% in January. - Core inflation, which excludes food and gas, slipped to 2.4% from 2.6%, the lowest core reading in nearly five years according to FactSet. - Some categories moved in different directions: rental costs showed signs of cooling, gas prices fell, while grocery prices ticked higher. - Data last year were partly distorted by a six-week government shutdown that affected official collection, and housing costs in November were partly estimated rather than fully measured. Summary: The January report indicates prices are rising more slowly than before, but not that prices are falling. Economists generally expect inflation to continue easing this year while noting risks such as delayed pass-through of tariffs and other cost pressures. Possible effects on borrowing costs and monetary policy are cited in coverage, though specific policy steps remain to be determined.