Government data released on Tuesday shows US consumer inflation held steady in December. Price pressures appear to be gradually easing across the economy. However, core necessities like food and housing continue to burden American households significantly.
Monthly and Annual Inflation Figures
Consumer prices increased by 0.3% from November to December. This figure matches the previous month's rise exactly. The Labor Department provided these numbers through an AP report.
Core inflation, which excludes volatile food and energy categories, climbed 0.2% during the same period. On an annual basis, the Consumer Price Index rose 2.7% compared to December of the previous year. Core inflation increased 2.6% year-on-year. Both annual rates matched November's figures precisely.
Economists See Signs of Peaking Inflation
Several economists now believe inflation may have reached its peak. Michael Pearce, the chief US economist at Oxford Economics, made a clear statement about this trend. "The recent run of figures suggests inflation has peaked," Pearce noted confidently.
Mixed Picture Across Different Categories
Falling gas prices and declining used car costs helped moderate the overall inflation increase. These decreases provided some relief to consumers. However, other essential categories showed concerning upward movements.
Grocery prices jumped 0.7% month-on-month in December. Food costs overall rose 2.4% compared with a year ago. Energy costs presented even starker increases according to an AFP report. Electricity costs increased nearly 7% during 2025. Natural gas prices soared by 11% over the same period. These substantial hikes add serious affordability pressures for many families.
Federal Reserve Actions and Outlook
The Federal Reserve reduced its key interest rate by a quarter-point in December. Despite this move, the central bank is expected to remain cautious before implementing further cuts. John Williams, president of the New York Fed, offered insights about inflation drivers.
Williams stated that tariffs have likely raised inflation by about half a percentage point. Underlying trends remain favorable overall. The Fed expects inflation to decline toward its 2% target by 2027.
Analysts highlight an important shift in the economic landscape. With inflation fears easing somewhat, the Fed may gain flexibility to respond to downside risks in the labor market. However, new uncertainty has emerged recently. A Department of Justice grand jury investigation into Fed Chair Jerome Powell introduces additional complications for monetary policy decisions.
Political Reactions and Economic Realities
Former President Donald Trump celebrated the inflation figures publicly. He took to social media to share his thoughts. Trump called them "Great (LOW!) Inflation numbers for the USA." He urged Powell to cut rates "MEANINGFULLY!!!" in his post.
The former president also praised estimates of solid fourth-quarter growth. He claimed credit for tariff measures that continue impacting the economy. These political statements highlight how inflation data intersects with election-year politics.
Despite the moderation in headline inflation numbers, persistent increases in essentials create ongoing challenges. Food costs keep climbing. Rent remains high across many regions. Utility bills continue straining household budgets. These realities highlight the ongoing political and economic challenges facing both the US administration and the Federal Reserve.
The inflation picture presents a complex mixed bag for American consumers. While some categories show improvement, the most essential expenses continue rising steadily. This situation ensures inflation will remain a central economic concern throughout the coming year.
