US consumer inflation showed further signs of moderation in December, according to data from the Bureau of Labor Statistics released on Tuesday.
Core consumer prices, which exclude volatile food and energy costs, rose 0.2% month-over-month and 2.6% year-over-year, the slowest annual pace since March 2021.
Headline inflation increased 0.3% in December and 2.7% over the year, in line with economists’ expectations.
Shelter costs were the largest contributor to the monthly increase, rising 0.4%. Food prices climbed 0.7%, while energy prices increased 0.3%.
Other categories, including recreation, airline fares, medical care, apparel, personal care, and education, posted gains, whereas communication services, used vehicles, and household furnishings saw declines.
Over the year, energy prices rose 2.3% and food prices increased 3.1%, leaving overall consumer prices up 2.7%, unchanged from November.
Analysts largely welcomed the report as a sign that inflation pressures are gradually easing, though some emphasized that the US economy is not yet on a clear disinflationary path.
“The CPI report covering the final month of 2025 was generally encouraging,” Wells Fargo wrote.
The firm noted that core CPI rose less than forecast, helped by a smaller-than-expected bounce in core goods prices following November’s delayed government shutdown.
“There is still plenty of signal in today’s report, and it strengthens our conviction that inflation will show continued progress toward returning to 2% in 2026,” Wells Fargo wrote. “Although it is not yet time to pop the champagne in our view, today's CPI report was welcome news.”
The firm also highlighted the labor market’s modest cooling and the potential for the Federal Reserve to move the federal funds rate gradually toward neutral.
Kathleen Brooks, research director at XTB, pointed out that while the report was in line with expectations, it did not signal a clear disinflation trend.
“The monthly CPI increase for December was a relatively high 0.3%, which justifies the Fed’s caution when it comes to signaling further rate cuts this year,” Brooks wrote.
She added that elevated shelter and food costs, along with recent upticks in energy prices, suggest that inflation remains above the Federal Reserve’s 2% target.
IG Senior Technical Analyst Axel Rudolph noted that stock indices struggled despite the positive inflation data.
“Despite slowing US core CPI reinforcing Fed rate cut expectations, solid JPMorgan earnings and a slightly upgraded World Bank global growth outlook, investor fatigue seems to have set in,” Rudolph wrote.