Here’s the inflation breakdown for December 2025 — in one chart
A grocery store in New York’s Manhattan borough on December 13, 2025.
Charly Triballeau | Afp | Getty Images
Progress in the fight to reduce inflation appeared to stall in December due to price pressures from food, dining out, natural gas, clothing and other categories of consumer spending.
consumer price indexInflation, a key inflation gauge, rose 2.7% in December from 12 months earlier, the Bureau of Labor Statistics said Tuesday. This rate did not change compared to the previous month and was consistent with forecasts.
“The bottom line is I think inflation is still disturbingly high,” said Mark Zandi, chief economist at Moody’s. “Inflation for staples and basic needs remains high.”
Tariffs increase inflation
The Federal Reserve, the US central bank, targets an average annual inflation rate of around 2% over the long term.
Zandi said the tariffs imposed by President Donald Trump are putting upward pressure on the inflation rate.
Tariffs are import taxes paid by the US-based importer. Economists expected businesses would pass at least some of this tax on to consumers through higher prices.
“I think if it weren’t for the tariffs, we would already be back on target,” Zandi said. “But tariffs increased inflation by slightly more than half [percentage] point.”
However, the shift to consumers has been more muted than expected, likely because businesses have chosen to erode profit margins rather than risk alienating consumers through higher prices, economists said. Companies that imported stock into the United States before the tariffs were implemented were also able to sell those products to consumers at normal prices.
The Supreme Court is poised to issue a ruling in the coming days or weeks that could shut down the Trump administration’s legal path to impose universal tariffs on a wide range of trading partners.
Economists said that even if there is no such decision, they expect inflation to peak and probably decline again in the second half of 2026.
“We think the direction of inflation is lower unless there are new tariffs,” said Tom Porcelli, chief economist at Wells Fargo.
Good news for the Central Bank
In general, the headline inflation rate is higher than it appears on paper, Zandi said.
The record-long government shutdown, which lasted from Oct. 1 to Nov. 12, prevented federal statisticians from collecting typical inflation data in October. Without that data, the BLS assumes no price increases occurred during the month for most categories of goods and services, Zandi said.
Moody’s estimates that once this data is included, the annual CPI inflation rate will be around 3%.
All in all, inflation-fighting trends look positive on the surface, likely a welcome sign for Federal Reserve policymakers deciding whether to ease interest rate policy in 2026, economists said.
“We expect officials to be happy to remain in the long pause as they wait and see the impact of the latest round of rate cuts, but with inflation fears easing, officials will feel freer to respond to downside risks in the labor market if conditions worsen,” Michael Pearce, chief U.S. economist at Oxford Economics, said in a note Tuesday.
Consumer staples raise affordability concerns
Here’s how affordability came about: It’s an important financial focal point for consumers and a talking point for politicians.
Inflation for some household needs increased in December.
For example, food prices at groceries and restaurants increased by 0.7% on a monthly basis from November to December, according to the CPI report.
In order for inflation to return to the target, the monthly inflation rate generally needs to be around 0.2%.
Certain categories, such as coffee and beef, have seen high inflation rates last year, around 20 percent and 16 percent respectively, due to supply constraints.
Clothing prices also increased by approximately 0.6% on a monthly basis.
But some increases may appear larger than they actually are due to data distortions caused by the government shutdown, economists say.
“Goods inflation appeared to be stronger than underlying trends suggested, largely due to the overrepresentation of holiday sales in the November CPI report due to how data was collected during the government shutdown,” Gargi Pal Chaudhuri, BlackRock’s chief investment and portfolio strategist for the Americas, said in a note Tuesday. “These deeper-than-normal discounts pushed prices down in November and created an artificial jump when prices returned to normal in late December.”
Plumbing piped gas service increased by 4.4% on a monthly basis and 11% on a yearly basis. Electricity prices decreased by 0.1% on a monthly basis, but increased by approximately 7% on a yearly basis.
On a positive note, Zandi said housing will play a stabilizing role, bringing down overall inflation in 2026 and 2027.
“Rent growth is still very weak,” he said.
