U.S. inflation cools to 2.4% in January, below forecasts

U.S. consumer prices rose 0.2% in January and 2.4% from a year earlier, coming in below forecasts, according to Bureau of Labor Statistics data released Friday. Core CPI, which excludes food and energy, increased 0.3% on the month and 2.5% year over year, matching expectations.

The annual CPI pace eased from December’s 2.7% advance. Economists had projected a 0.3% monthly gain and a 2.5% annual rate for the headline index. Core inflation registered its slowest annual increase since early 2021.

CPI measures the average change over time in prices paid by urban consumers for a basket of goods and services. The core index is used to track underlying inflation trends because it excludes more volatile food and energy categories. The Bureau of Labor Statistics publishes CPI data monthly.

Price moves varied by category. Energy prices fell 1.5% from December, and used cars and trucks declined 1.8% on the month. Airfares rose 6.5% from December. Food prices were 2.9% higher than a year earlier, with items such as coffee and beef remaining above year-ago levels.

Goods sensitive to import costs posted firmer readings as companies and consumers continued to face the effects of tariffs put in place last year. Apparel rose 0.3% from December. Video and audio products increased 2.2% on the month, computers and smart home assistants were up 3.1%, and laundry equipment climbed 2.6%. Some analysts had anticipated a pickup in core goods inflation in January due to tariff pass-through and typical seasonal patterns.

The inflation release followed labor market data earlier in the week showing the unemployment rate edged down at the start of the year and payrolls expanded by roughly twice forecasts.

As we reported earlier, Citigroup’s Benjamin Wiltshire, a rates trading desk strategist, said markets’ confidence that inflation will keep fading may leave investors under-positioned for an upside surprise. He noted the consumer appears more resilient than markets expect and argued inflation expectations could be nudged higher from current levels, making inflation-upside protection look inexpensive.