Inflation slowed in January as consumer prices rise 2.4% over prior year to start 2026

Inflation cooled more than expected in January, data released Friday by the Bureau of Labor Statistics showed.

The Consumer Price Index showed that consumer prices increased 0.2% in January from a month earlier and 2.4% on an annual basis, down from 2.7% last month. Economists surveyed by Bloomberg had expected a 0.3% monthly increase in consumer prices and an annual bump of 2.5%.

On a “core” basis — which excludes volatile categories like energy and food — prices rose 0.3% over the past month and 2.5% over the prior year in January. Both met expectations. This also marked the slowest annual increase in core inflation since March 2021.

Friday’s data represented broad progress from December’s reading. The inflation print also offered this week’s second better-than-expected reading on the state of the economy. Wednesday’s jobs report showed the unemployment rate ticked down at the start of the year, while payrolls grew by twice what economists had expected.

“Headline CPI inflation was a touch softer than expected in January, delivering a welcome surprise to the downside at the beginning of the year,” Bernard Yaros, lead economist at Oxford Economics, said in a note.

“In recent years, residual seasonality, along with delayed price adjustments in response to pandemic-era shocks, have led to upside CPI surprises in January,” Yaros continued. “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.”

Read more: How to protect your savings against inflation

Regardless, some categories may continue to vex consumers in 2026, the data showed. Certain food prices, for example, have been especially elevated in the past year, including coffee and beef, helping to push that category 2.9% higher on an annual basis in January. The index for airfares similarly popped 6.5% from a month earlier, according to Friday’s data.

The index for energy prices, meanwhile, fell 1.5% in January from December’s levels, while used car prices slid 1.8% on a monthly basis.

Also in focus: the continued impacts of President Trump’s sweeping tariffs, which were largely borne by companies and consumers last year. Apparel, a category sensitive to levies, rose 0.3% from the prior month. Video and audio products jumped 2.2%, while computers and smart home assistants rose 3.1%. Laundry equipment jumped by 2.6%.

Bank of America analysts wrote in a note last week that they expected core goods prices to accelerate from December’s levels, reflecting “a combination of increased tariff pass‑through and the typical tendency for January inflation to run hotter than the rest of the year.”