US Inflation Steady at 2.7% in December 2025 CPI Report

Consumer prices across the United States rose 2.7 percent in the 12 months ending December 2025, matching the pace from the month before, according to the latest data from the Bureau of Labor Statistics. This figure covers a broad basket of goods and services that everyday people buy, from groceries to gas and rent. The report came out on Wednesday, showing inflation did not speed up or slow down at the end of the year. Economists had expected a similar outcome, but many families still feel the pinch from higher costs in daily life.

Background

Inflation has been a big story for years now. Back in June 2022, prices were jumping at a 9.1 percent annual rate, the highest in decades. That was during the height of the pandemic recovery, when supply chains broke down and demand surged. Things started to cool off after that. The Federal Reserve raised interest rates sharply to bring prices under control. By 2025, inflation stayed at or below 3 percent for the whole year.

Even with that progress, prices kept climbing. Households faced higher bills for food, housing, and other basics. The job market stayed strong for much of the year, which helped keep wages up but also fed into price pressures. Then came new tariffs announced by the Trump administration. Those levies on imports were meant to protect US workers, but some worried they would push prices higher. In the end, the effect was smaller than expected. Many stores absorbed part of the extra costs instead of passing them all to shoppers.

The Fed stepped in late in 2025. It cut its key interest rate three times in the final months. Officials said a softening job market was a bigger worry than rising prices at that point. Chair Jerome Powell pointed out that labor challenges outweighed the risk of inflation picking up again. Still, the central bank's preferred gauge of inflation, known as core PCE, has sat above the 2 percent target for 55 straight months.

Key Details

The Consumer Price Index, or CPI, measures changes in prices for urban consumers. It went up 0.3 percent in December alone, after seasonal adjustments. Over the full year, that added up to the 2.7 percent gain.

Food and Energy Breakdown

Food prices stood out with a 3.1 percent rise over the year, the biggest jump among major categories. Grocery bills saw their sharpest spike since 2022. Items like eggs, meat, and produce drove much of that. Energy costs increased 2.3 percent annually, held back by steady gas prices in some areas.

Core inflation, which strips out food and energy to focus on steadier trends, rose 2.6 percent for the year. That was a touch lower than the 2.7 percent expected by analysts. In December, core prices climbed 0.2 percent, below the 0.3 percent forecast. Used cars and trucks saw prices ease to 1.6 percent from 3.6 percent the month before. Household goods also slowed to 4 percent from 4.6 percent.

Other areas kept rising. Shelter costs, a huge part of household budgets, went up 3.2 percent. Medical care matched that at 3.2 percent. Recreation climbed 3 percent, and personal care products 3.7 percent. These numbers show where Americans are spending more just to keep up.

"December's CPI report reinforces price pressure is edging higher across key consumer product categories that matter most to consumers," said Rob Holston, global and Americas consumer products leader at EY.

The index for all urban consumers hit 324.054, using a base from 1982-84 set at 100. For wage earners and clerical workers, it was 317.014 with a 2.6 percent yearly gain.

What This Means

Steady inflation at 2.7 percent means prices are not racing ahead, but they are not falling back much either. Families continue to deal with higher costs for essentials. A trip to the store or paying rent takes a bigger bite out of paychecks. Savings for big goals like homes or retirement feel harder to build.

For the Federal Reserve, this data points to a pause. The next meeting is January 27 to 28. Experts expect rates to stay put, given the mix of cooling core inflation and sticky headline numbers. A recent jobs report showed unemployment dropping a bit, which adds to the case for holding steady.

Businesses face their own choices. Retailers took on some tariff hits last year, but more could come. If they pass on costs now, grocery prices might climb further. On the flip side, slower core goods inflation hints at a peak in those pressures. Used car prices dropping offers relief for buyers in the market.

Looking ahead, forecasts vary. Some see core inflation dipping toward 2 percent over time, if the Fed keeps its course. Others warn it could stick higher, especially with potential new policies on trade and taxes. Households will watch their budgets closely. Many have cut back on eating out or travel to make ends meet. The job market's health will play a key role too. If hiring slows more, it could ease wage pressures and help tame prices.

"By most accounts, inflation is unlikely to drop to the 2% target in 2026, although it may gravitate towards that target," said Carla Nunes, a managing director at Kroll's Financial Advisory Practice.

Economists track these shifts month by month. The December numbers cap a year of ups and downs. Inflation came down from pandemic highs but lingers above comfort levels. Policymakers, businesses, and families all adjust based on where things stand.