Here’s the inflation breakdown for January 2026 — in one chart
A worker stocks Angus sirloin fillets in the meat section of a grocery store in Washington, D.C.
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Economists said inflation slowed in January as price pressures eased on basic consumer goods such as food and gasoline, but prices remained high in some categories such as electricity and home heating.
consumer price indexInflation, a key inflation gauge, rose 2.4% in January from 12 months earlier, the Bureau of Labor Statistics said Tuesday. This was down from 2.7% in December and lower than expected.
Economists said inflation was still running above the target of policymakers at the U.S. central bank, the Federal Reserve, which aims for an inflation level of around 2 percent.
Impact of tariffs and immigration policy
Moody’s chief economist Mark Zandi said inflation would likely be in the Fed’s target without the Trump administration’s tariffs and immigration policies.
Economists said President Donald Trump’s tariffs on a number of trading partners are putting upward pressure on prices as many businesses pass on at least some of those import taxes to U.S. consumers. They stated that immigration policy also puts upward pressure on service prices by reducing labor supply.
“Overall, inflation is still too high for most Americans and the Fed,” Zandi said. “But I think we have seen the worst. If there is no change in policy (tariffs and immigration policy) we should have inflation at a more comfortable level by this time next year.”
Yale University’s Budget Lab estimated in January that the effective U.S. tariff rate had risen to 16.9%, the highest level since 1932. The Supreme Court is set to rule on the constitutionality of most of Trump’s tariffs in the coming weeks.
‘Big warning’ in CPI report
Jason Pride, chief of investment strategy and research at asset manager Glenende, wrote in a note Friday that the slowdown in inflation was “relatively broad-based” in January, barring “some acceleration in services (particularly transportation costs).”
But Zandi said there was a “big caveat” in the CPI data: Inflation looks better on paper than it actually is, due to a quirk in the data resulting from the government shutdown in the fall.
The record-long shutdown, which lasted from Oct. 1 to Nov. 12, prevented federal statisticians from collecting typical inflation data in October. Without this data, the BLS assumed no price increases occurred during the month for most categories of goods and services.
Zandi said Moody’s estimates the CPI inflation rate will be around 2.7% when this data is included.
Inflation report likely won’t change Fed’s stance
The inflation report comes amid Trump’s recent calls to lower interest rates. He announced that he chose Kevin Warsh to replace Fed Chairman Jerome Powell. Powell’s term ends in May.
However, economists do not expect the January inflation report to accelerate policy makers’ interest rate cuts.
“The downward surprise in January CPI is welcome news for the Federal Reserve, but we are not changing its baseline forecast for monetary policy based on a single inflation reading,” Bernard Yaros, chief economist at Oxford Economics, said in a note Friday. “Continued distortions in price data resulting from the shutdown, solid growth expectations this year and a stabilizing employment market will keep the central bank waiting until June.”
Where prices rise and fall
While inflation decreased in some goods and services, it increased in others.
For example, according to CPI data, gasoline prices decreased by approximately 3 percent on a monthly basis and 7.5 percent on an annual basis in January.
Food inflation for groceries and eating out was 2.9% on an annual basis in January.
That’s high by historical standards, Zandi said. The same goes for categories such as electricity, clothing, child care, medical care and home heating, he said.
According to CPI data, natural gas service prices increased by approximately 10% annually in January.
Outside of gasoline, “inflation on most necessities is well above target, above 3% in many cases,” Zandi said.
