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By Hugh Cameron
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The latest inflation reading from the Department of Labor has revealed that inflation—while still far from the flat levels touted by President Donald Trump—continues to slow toward its pre-pandemic rates, adding to a run of encouraging economic signals that have marked the opening of 2026.
On Friday morning, the Bureau of Labor Statistics (BLS) reported that consumer prices rose 0.2 percent in January, down from a 0.3 percent increase in December. On an annual basis, inflation eased to 2.4 percent from 2.7 percent the previous month, marking the lowest year‑over‑year reading since May 2025. Prior to the release, analysts had forecast the monthly rate holding steady at 0.3 percent, with annual inflation dropping less significantly to 2.5 percent.
Meanwhile, core inflation—which excludes the volatile food and energy categories—climbed to 0.3 percent from 0.2 percent on a monthly basis, as the annual rate fell to 2.5 percent from 2.6 percent, both in line with consensus expectations.
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This follows the agency reporting on Wednesday that the U.S. economy added 130,000 jobs during the month, nearly double the amount forecast by analysts, and up from tallies of 48,000 in December and 41,000 in November.
Why It Matters
Ahead of Friday, experts had said a consensus-or-below reading—pulling price gains closer to pre-pandemic norms—would help alleviate some of policymakers’ key concerns about the economy, and make those at the Federal Reserve more open toward further rate cuts. And analysts have already noted that the figures could help the White House push back against warnings that Trump’s aggressive tariff agenda would lead to broad-based price hikes.
“Today’s inflation report comes on the heels of the jobs report released earlier this week that showed better-than-expected labor market conditions in January,” said Bright MLS Chief Economist Lisa Sturtevant.
“Just a month or two ago, there was talk of ‘stagflation’, or a combination of high inflation and high unemployment,” she wrote in a press note following the release. “Now, is it possible we’re going to have a ‘Goldilocks’ economy, where unemployment is low and inflation is coming down?”
What To Know
According to the BLS, shelter costs drove much of January’s increase, with food prices also contributing. However, it notes that the energy index—which dropped 1.5 percent on a monthly basis—helped to offset some of these gains.
Within energy—down 0.1 percent annually given gains in prior readings—gasoline prices have fallen 7.5 percent over the past 12 months, though electricity and natural gas have risen by 6.3 percent and 9.8 percent, respectively.
Other notable changes contained in Friday’s report were a 6.5 percent monthly bump in airline fares, and the price of eggs dropping 7.0 percent between December and January.
And coming only days after an encouraging employment print, the White House has already celebrated the data as another endorsement of the president’s economic agenda—or “Trumponomics”—one year into his second term as president.
“Today’s expectation-beating CPI report proves that President Trump has defeated Joe Biden’s inflation crisis,” spokesman Kush Desai posted on X. “Overall inflation fell, and real wages grew by $1,400 in President Trump’s first year in office.”
“THIS is how you achieve AFFORDABILITY!” wrote White House press secretary Karoline Leavitt on X. “The U.S. economy is roaring back to life, thanks to President Trump!”
During President Joe Biden’s term, inflation ranged from a low of 1.4 percent when he took office in January 2021 to a peak of 9.1 percent in June 2022. By the time Biden left office in January 2025, annual inflation had cooled to about three percent, with prices rising 2.9 percent in December 2024, the final full month of his presidency.
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What People Are Saying
Heather Long, chief economist at Navy Federal Credit Union, quoted in CNBC: “This is great news on inflation. Inflation fell to the lowest level since May and key items such as food, gas and rent are cooling off. This will provide much needed relief for middle class and moderate-income families.”
Bernard Yaros, lead economist at Oxford Economics, wrote in a press note: “Headline CPI inflation was a touch softer than expected in January, delivering a welcome surprise to the downside at the beginning of the year. In recent years, residual seasonality, along with delayed price adjustments in response to pandemic-era shocks, have led to upside CPI surprises in January. These were no longer on full display this time around, further reinforcing our view than tariff-induced price increases on the goods side are largely behind us.”
James Bentley, director at Financial Markets Online, said: “This week’s economic data will give President Trump everything he wants - except an interest rate cut. Inflation is cooling and America's job creation engine is running hot. The ‘January effect’ - in which businesses often hike prices at the start of the year - was less pronounced last month, helping both the monthly and annual inflation rates to come in below expectation.”
What Happens Next
According to analysts, the better-than-expected reading—which brings headline inflation closer to the Fed’s annual, two-percent goal—will give policymakers greater leeway in cutting interest rates at their upcoming meetings.
The Federal Open Market Committee is scheduled to meet March 17 and 18, at which the CME Fedwatch tool predicts the central bank is likely to hold rates steady. However, CNBC reports that the odds of a cut in later months have risen following Friday’s release.
Update, 02/13/2026, 10:14 a.m. ET: This article was updated with additional information.
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