Latest inflation report reinforces concerns over the impact of tariffs

Prices climbed more than anticipated last month, with the latest inflation report reinforcing Americans’ concerns about the impact of tariffs. Consumer prices were up 2.7 percent in December from a year earlier, the Labor Department reported Tuesday. December's CPI was forecasted to show inflation pressures remaining steady in the final month of 2025, and economists surveyed by The Wall Street Journal predicted that core inflation would edge up only slightly.

The Labor Department was expected to report that consumer prices rose 2.6 percent in December compared with a year earlier, according to economists' estimates compiled by data provider FactSet. Monthly prices, however, were in line with expectations to rise 0.3 percent in December, faster than is consistent with the Federal Reserve's 2 percent inflation goal. Meanwhile, core inflation — which excludes volatile factors such as food and energy — increased 2.6 percent over the year. That was also unchanged from November.

Stock futures, which opened lower on Tuesday, have risen slightly following the inflation news. In November, year-on-year, headline inflation was 2.7 percent, while core inflation was 2.6 percent. Most prices were collected in the second half of November, after the government reopened, when holiday discounts kicked in, which may have biased November inflation lower. Because rental data weren’t fully collected in October, the agency used estimated figures, which economists say may have pushed prices lower.

Inflation continues to be a major political concern as President Donald Trump introduces measures intended to curb prices and ease costs for consumers. The figures were harder to predict this month, because the six-week government shutdown last fall suspended the collection of price data used to compile the inflation rate. Some economists expected the December figures would show a bigger jump in inflation as the data collection process gets back to normal. Inflation has fallen sharply from its 9.1 percent peak in June 2022, but it has hovered near 3 percent since late 2023.

Everyday costs remain much higher than before the pandemic — groceries are up about 25 percent, and prices for essentials like rent and clothing have also risen—adding to public frustration with the economy, an issue both President Donald Trump and former President Joe Biden have tried, with limited success, to tackle. The Federal Reserve is trying to contain inflation by keeping rates high while supporting jobs by cutting them if unemployment rises. With inflation still above its 2 percent target, the Fed is cautious about further cuts.

After lowering rates slightly in December, Chair Jerome Powell said policymakers would wait to see how the economy develops. Fed officials remain divided over whether to cut rates again or keep them near 3.6 percent. President Trump has criticized the Fed for not cutting more aggressively, arguing it would lower borrowing costs, though mortgage rates are set by markets, not the Fed.

Tensions rose further after the Justice Department subpoenaed the Fed over Powell’s testimony about a building renovation. Powell dismissed the allegations as a pretext for the White House to exert more control over the central bank. January 2026 CPI data are scheduled to be released on February 11.