The latest US inflation data for January 2026 showed a more pronounced cooling than anticipated, with the Consumer Price Index (CPI) rising 2.4% over the past 12 months, down from December's 2.7% and below economist forecasts of 2.5%. On a monthly basis, prices increased 0.2%, also coming in below expectations. The core CPI, which excludes volatile food and energy prices, rose 2.6% year-over-year.
This marks the lowest annual inflation reading in nine months, with core inflation at its lowest level since 2021. The data, released by the US Bureau of Labor Statistics (BLS), offers some relief but reinforces the view that the Federal Reserve is likely to keep interest rates on hold in the near term. The Fed's benchmark rate currently sits in the 3.50%–3.75% range.
Alternative data provider Truflation reported even lower figures, stating on social media that its CPI reading stood at 0.74% and the Personal Consumption Expenditures (PCE) measure at 1.27%. Truflation commented that it had correctly predicted the BLS numbers would be "cooler than the market consensus" and expressed hope that official metrics would "catch up with the real price trends."
The report arrives as the Fed, under Chair Jerome Powell in the final months of his tenure, faces a delicate balancing act. Policymakers are weighing resilient economic growth—highlighted by a strong January jobs report—against the goal of steering inflation sustainably back to its 2% target. Economists note that core inflation is cooling only gradually, with factors like the pass-through of import tariffs and complex seasonal adjustments contributing to price pressures.
Markets reacted positively to the softer headline print, with US stock index futures paring earlier losses. Analysts, including strategists at Morgan Stanley, noted that a backdrop of strong US growth combined with easing inflation has historically supported risk-sensitive assets. However, high prices continue to weigh on households, keeping affordability a top consumer concern and a potent political issue as the midterm elections approach.
