US inflation cools to 2.4% in January, near five-year low as gas and housing costs ease
Inflation dropped to 2.4% in January compared with a year earlier, down from 2.7% in December and moving closer to the Federal Reserve’s 2% target, AP reported.
Core prices, which exclude volatile food and energy categories, rose 2.5% year-on-year in January, down from 2.6% the previous month and marking the smallest increase since March 2021.The data suggests inflationary pressures could be easing, though it comes after prices of food, fuel and housing surged following the pandemic, leaving overall consumer prices about 25% higher than five years ago.
The broad rise in costs has become a major political issue around affordability.On a monthly basis, consumer prices rose 0.2% in January from December, while core prices increased 0.3%.The report may signal cooling inflation, though economists note that prices often rise more in January as companies reset pricing at the start of the year.
While gas prices are expected to have declined, grocery costs could see upward pressure after rising in December.Inflation had surged to 9.1% in 2022 amid strong consumer spending and supply chain disruptions following the pandemic.
It declined through 2023, stabilised around 3% by mid-2024, and has since improved only gradually.Inflation softened slightly in late 2025, partly reflecting distortions caused by a six-week government shutdown that disrupted data collection, leading to estimates for housing costs that economists said may have artificially lowered inflation readings.At the same time, wage growth has slowed as hiring momentum weakened, reducing workers’ bargaining power.
Lower wage growth can ease inflation pressure as businesses face less cost pressure 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, AP quoted him as saying.Some businesses are still absorbing tariff-related costs, though economists expect companies may raise prices in coming months to offset those 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.
