Annual inflation stayed at 2.7 percent in December, as higher food prices canceled out lower costs for gasoline and other goods, according to new federal data released Tuesday.
The Bureau of Labor Statistics reported that the consumer price index rose 0.3 percent on a monthly basis. The year-over-year rate stayed the same as in November. Both figures came in below expectations from economists.
Core inflation, which excludes food and energy, rose 0.2 percent for the month and stood at 2.6 percent annually. Those readings were also slightly lower than forecasts. The data suggests inflation pressures remain contained but are still above the Federal Reserve’s 2 percent target.
Food prices were a key driver of December’s increase. Grocery prices rose 0.7 percent for the month and are up 2.4 percent from a year ago. Food away from home increased 4.1 percent over the past year, showing continued pressure on restaurant prices.
Meat, poultry, and fish prices surged 6.9 percent compared with last year. Fruit and vegetable prices rose 0.5 percent. Egg prices continued to fall and are down more than 20 percent from a year ago, following the easing of avian flu-related supply issues.
Energy prices rose modestly overall, but gasoline prices fell. Gas prices declined 0.5 percent in December and are down 3.4 percent from a year ago. Electricity prices slipped slightly for the month but remain higher over the past year.
Housing costs continued to rise and were the largest contributor to inflation. Shelter prices increased 0.4 percent in December and are up 3.2 percent from last year. Rent and homeowners’ equivalent rent both climbed, while insurance costs jumped sharply on an annual basis.
Transportation-related services posted mixed results. Auto maintenance costs increased, while vehicle repair prices declined for the month. Used car prices fell 1.1 percent in December and are only modestly higher than a year ago.
Economists said recent inflation data has been harder to interpret due to disruptions caused by a 43-day government shutdown late last year. The shutdown interrupted normal data collection, which could create a slight downward bias in inflation readings through the spring.
Still, many analysts say inflation appears to have peaked. Tariff-related price increases appear to have largely worked their way through the system, with little additional pressure showing up in consumer goods.
President Donald Trump praised the report and called on the Federal Reserve to cut interest rates. In a post on Truth Social, Trump said the low inflation numbers showed tariffs had worked and urged rate cuts, saying failure to act would leave the Fed “too late.”
Markets currently expect the central bank to hold rates steady at its next meeting later this month. Futures pricing shows overwhelming expectations that no change will be announced, despite political pressure for cuts.
While inflation has cooled significantly from its peak, prices for everyday necessities remain elevated. Economists warn that lower-income Americans continue to feel the strain most sharply, particularly as food and housing costs stay high.