The annual inflation rate in the US edged up to 3% in January 2025, compared to 2.9% in December 2024, and above market forecasts of 2.9%, indicating stalled progress in curbing inflation. This uptick suggests persistent price pressures across various sectors despite the Federal Reserve’s efforts to stabilize inflation.
US inflation edges up against expectations
Energy costs rose 1% year-on-year, marking the first increase in six months, following a 0.5% decline in December. The main contributors to this reversal were gasoline prices, which fell at a slower pace (-0.2% vs -3.4%), along with fuel oil (-5.3% vs -13.1%), while natural gas prices remained steady at 4.9%. Meanwhile, prices for used cars and trucks rebounded (1% vs -3.3%), and transportation costs accelerated further (8% vs 7.3%), reflecting increased demand and supply chain constraints. The decline in new vehicle prices also moderated slightly (-0.3% vs -0.4%), suggesting some resilience in the auto market.
Inflation remains unchanged for food
On the other hand, inflation remained unchanged for food (2.5% vs 2.5%) and slowed for shelter (4.4% vs 4.6%), offering some relief to consumers. However, on a monthly basis, the Consumer Price Index (CPI) rose by 0.5%, exceeding both the previous month's increase of 0.4% and market expectations of 0.3%. Shelter costs, which climbed 0.4%, were a major contributor to this rise, accounting for nearly 30% of the overall increase.
Annual core inflation unexpectedly rises
Additionally, annual core inflation, which excludes volatile food and energy prices, unexpectedly rose to 3.3%, defying forecasts of a slowdown to 3.1%. The monthly core inflation rate also increased more than expected, reaching 0.4%, signaling that underlying inflationary pressures remain stubborn. These figures could influence future Federal Reserve policy decisions as officials assess whether additional measures are needed to bring inflation closer to the 2% target.
