U.S. inflation didn’t re-accelerate in December, but it also didn’t meaningfully cool. According to Consumer prices up, the consumer price index (CPI) rose 2.7% year over year, unchanged from November and broadly in line with expectations. The Federal Reserve targets roughly 2% inflation over time, so the question is less “are we back to normal?” and more “how long until the last mile?”
Where the report bites is in everyday categories that shape sentiment and politics. Food prices rose 0.7% month over month in December, the fastest one-month grocery move in years, with overall food inflation running 3.1% year over year and grocery prices up 2.4% year over year, per food prices data. Energy-adjacent bills were also noisy. Utility piped gas rose 4.4% m/m and was up 11% y/y, while electricity was up about 7% y/y, per utility inflation details.
The “why” is a mix of policy and measurement. Economists cited tariffs adding upward pressure and argued pass-through has been muted because some firms are absorbing costs in margins. At the same time, the fall government shutdown (Oct. 1 to Nov. 12) distorted collection, forcing the Bureau of Labor Statistics to assume flat prices for many categories in October. That makes month-to-month comparisons trickier and may exaggerate the apparent December snapback, per shutdown distortions.
Next steps: markets and borrowers should expect the Fed to stay cautious near term, with any 2026 easing dependent on whether core inflation keeps gliding lower and whether “necessities inflation” cools without a growth scare. Price relief may come more from housing, where rent growth is described as weak, than from groceries or utilities. Position for a slower, bumpier disinflation path than the headline suggests.
