December CPI Stays in Check as Core Inflation Cools — Evening Brief – 01.13.26 

U.S. inflation firmed modestly in December, but the underlying trend continued to move in a direction Federal Reserve policymakers will welcome. The Bureau of Labor Statistics reported that headline CPI rose 0.3% month over month, in line with expectations and a step up from November’s 0.2% increase. On a year-over-year basis, prices advanced 2.7%, slightly above the 2.6% consensus but unchanged from the prior month. 

The December pickup was widely anticipated, reflecting the unwinding of seasonal distortions tied to data-collection disruptions during the government shutdown, which exaggerated discounting in November. Shelter costs were the primary driver, rising 0.4% on the month, while food prices climbed 0.7% and energy rose 0.3%. 

Beneath the surface, however, inflation pressures looked more contained. Core CPI, which excludes food and energy, increased just 0.2% month over month and held steady at 2.6% year over year—defying expectations for a reacceleration to 2.7% and marking the lowest core inflation rate since March 2021. 

Even more notable, the Federal Reserve’s long-favored gauge of underlying price pressure, services inflation excluding shelter (“Supercore”), slowed again on a year-over-year basis, reaching its softest pace since September 2021. That trend suggests easing wage-sensitive inflation, a key hurdle for the Federal Reserve as it weighs the timing of further rate cuts. 

Price increases in December were concentrated in recreation, airline fares, medical care, apparel, personal care, and education, while communication services, used vehicles, and household furnishings posted declines. 

For markets and the Fed, this mix looks incrementally positive for the disinflation story. The slightly hotter headline print is largely a function of shelter and food, both noisy and lagging, while the cooler core and supercore readings support the view that underlying inflation is gliding lower rather than stalling out. 

In rates markets, this type of report typically anchors front‑end yields as traders keep near‑term rate‑cut expectations intact while doing little to shift longer‑term inflation premia, since the data neither forces a more aggressive cutting cycle nor revives fears of a renewed inflation flare‑up. 

The CPI gives the Fed cover to stay patient at upcoming meetings while keeping at least a modest easing bias on the table for later in the year, and it is unlikely on its own to derail risk sentiment or materially reprice the path of policy.