US inflation stays at 2.7% in December – Financial Times
US inflation stayed at 2.7 per cent in December, according to data that suggested price growth is being contained even as it remains above the Federal Reserve’s target.
Tuesday’s annual consumer price index figure was unchanged from November and in line with the expectations of economists polled by Bloomberg.
Core inflation, stripping out volatile food and energy prices, was 2.6 per cent, just below expectations of 2.7 per cent. Housing-related prices rose 3.2 per cent, meanwhile, pushing up the headline figure.
The release from the Bureau of Labor Statistics indicated price rises in the world’s leading economy had eased, despite concerns last year that Donald Trump’s aggressive deployment of tariffs could fuel a lasting inflationary surge.
“The key takeaway is that goods prices were very benign, which underscores the point that tariffs have had a far more muted impact on inflation than feared,” said James Knightley, chief international economist at ING.
Still, economists remained wary of the data after a sharp drop in the previous month’s release drew criticism that it had been distorted by a halt to data collection during last year’s record government shutdown.
“Although these values suggest a softening in inflation, we are cautious not to extrapolate too much from this volatile report,” said Michael Hanson, a senior economist at JPMorgan.
Trump was quick to seize on the numbers on Tuesday morning, repeating calls for the Fed to slash borrowing costs and renewing his criticism of the central bank’s chair, Jay Powell.
“JUST OUT: Great (LOW!) Inflation numbers for the USA,” he wrote on his Truth Social platform. “That means that Jerome ‘Too Late’ Powell should cut interest rates, MEANINGFULLY!!!”
Analysts said inflation is likely to continue to decline towards the Fed’s target rate of 2 per cent in 2026. The central bank’s preferred inflation gauge is the personal consumption expenditures index, which registered 2.8 per cent in September.
The CPI report will bolster Wall Street’s expectations that the Fed will hold rates steady this month after three cuts in 2025.
“The encouraging inflation news helps ease the dilemma of the Federal Reserve,” said Michael Pearce, chief US economist at Oxford Economics. “We expect officials are happy to remain on extended pause, as they wait and see the impact of their recent string of rate cuts.”
The two-year Treasury yield, which is highly sensitive to interest rate expectations, dropped 0.03 percentage points to 3.52 per cent following Tuesday’s inflation report. Two interest rate cuts in 2026 are currently priced in by traders in the futures market.
The US dollar index fell after the release, while stock market futures rose.
The data was published amid turmoil at the Fed after it emerged on Sunday that the Department of Justice had taken the unprecedented step of launching a criminal probe into Powell over a $2.5bn refurbishment of the central bank’s headquarters.
Powell said the move, which has stoked fears about an erosion of Fed independence, was designed to pressure policymakers into cutting rates more quickly in line with Trump’s demands.
US and European economics officials have rallied around Powell, with global central bank chiefs releasing a statement on Tuesday saying they “stand in full solidarity” with the US central bank chief.
