US Inflation Declines to Near Five-Year Low in January
A key measure of inflation in the United States dropped to nearly a five-year low in January, providing some relief to consumers after years of sharp cost increases. The decline was driven by slowing growth in apartment rental prices and falling gas prices, according to recent data.
Inflation Figures Show Significant Improvement
Inflation decreased to 2.4% in January compared with the same period a year earlier, down from 2.7% in December. This brings the rate closer to the Federal Reserve's long-standing target of 2%. Core prices, which exclude the volatile categories of food and energy, rose 2.5% year-on-year in January, down from 2.6% the previous month. This marks the smallest increase in core prices since March 2021.
On a monthly basis, consumer prices increased by 0.2% in January from December, while core prices saw a 0.3% rise. The data suggests that inflationary pressures may be easing, though it comes after a period of significant price surges in food, fuel, and housing following the pandemic. Overall consumer prices remain about 25% higher than they were five years ago, making affordability a major political issue.
Factors Influencing the Inflation Trend
Economists note that prices often experience a seasonal uptick in January as companies reset pricing at the start of the year. While gas prices are expected to have declined, grocery costs could face upward pressure after rising in December. Inflation had peaked at 9.1% in 2022, driven by strong consumer spending and supply chain disruptions in the wake of the pandemic. It then declined through 2023, stabilized around 3% by mid-2024, and has since improved only gradually.
Inflation softened slightly in late 2025, partly due to distortions caused by a six-week government shutdown that disrupted data collection. This led to estimates for housing costs that economists believe may have artificially lowered inflation readings.
Wage Growth and Economic Outlook
At the same time, wage growth has slowed as hiring momentum weakened, reducing workers' bargaining power. Lower wage growth can ease inflation pressure by reducing the cost pressures that businesses face to raise prices. More moderate wage gains are a key reason many economists expect inflation to continue easing this year.
"We're not expecting inflation to start up again by any stretch," said Luke Tilley, chief economist for Wilmington Trust, as quoted by AP.
Some businesses are still absorbing tariff-related costs, though economists anticipate that companies may raise prices in the coming months to offset these expenses. However, most forecasts suggest inflation will decline further by the second half of the year and move closer to the Federal Reserve's 2% target by the end of 2026.
The broad rise in costs over recent years has become a significant concern for consumers and policymakers alike, highlighting ongoing challenges in the economic landscape.
