Inflation held steady in December as Fed prepares for January meeting

Year‑over‑year CPI was 2.7% in December and core CPI rose 2.6%; headline monthly inflation increased 0.3% and core monthly inflation increased 0.2%. Markets and economists expect the Federal Open Market Committee to hold interest rates at its January 27–28 meeting.

The US ended 2025 with lower inflation than a year earlier, but rates remained above the Federal Reserve's 2% target. December's year‑over‑year consumer price index was reported at 2.7%, matching November and consensus forecasts. Core CPI, which excludes food and energy, rose 2.6% from a year ago and moved in line with November's pace. Policymakers will consider this data alongside recent jobs figures as they approach their first policy meeting of the year. Key details: - Headline CPI rose 0.3% month over month in December, matching expectations, and was 2.7% year over year. - Core CPI increased 0.2% month over month and was 2.6% year over year, a touch below some forecasts. - The US added 584,000 jobs in 2025, and unemployment was low in December though higher than a year earlier. - Traders and economists saw a 95% probability in CME FedWatch that the Fed will hold rates at its January 27–28 meeting after three rate cuts late last year. - Federal Reserve Chair Jerome Powell said the Justice Department served the Fed with grand jury subpoenas related to his testimony about renovations, and international central bankers expressed solidarity with the Fed. Summary: The December CPI report shows inflation trending lower but still above the Fed's 2% goal, and recent labor market data remains a key consideration. The Federal Open Market Committee is scheduled to meet January 27–28, when officials are expected to use these reports to inform their decision; the short‑term policy path is therefore tied to upcoming official deliberations.