Inflation slowed in January, reaching a nearly five-year low of 2.4%, driven by decreased apartment rental price growth and gas prices. Core prices also saw a smaller increase, leading to anticipation of potential interest rate cuts by the Federal Reserve.
A key measure of inflation dropped to nearly a five-year low in January as apartment rental price growth slowed, and gas prices dipped.In January, inflation fell to 2.4% a year earlier, down from 2.7% in December 2025.
Core prices, which don’t include food and energy categories, increased only 2.5% in January from a year ago, down from 2.6% the previous month and the smallest increase since March 2021, the Associated Press reported. RELATED: Beef prices in focus as Trump signs order aimed at consumer reliefThe Bureau of Labor Statistics released data for the inflation report Friday, and it infers that inflation may be cooling, but it comes after the cost of food, gas, and apartment rents spiked after the pandemic, with consumer prices roughly 25% higher than they were in 2021.According to the Associated Press, consumer prices increased 0.2% in January from December, while core prices jumped 0.3%. Moreover, core inflation was held down by a drop in the price of used cars, which declined 1.8% just in January from December.Meanwhile, gas prices dipped 3.2% in January and are down 7.5% from 2025. Last month, grocery prices rose 0.2%, following a 0.6% rise in December 2025.The AP reported that if inflation ticks closer to the Federal Reserve’s goal of 2%, this may permit the central bank to slash its key short-term interest rate more in 2026.But most experts predict inflation to decline more by the second half of the year and drop closer to the Fed's target by the end of this year.Early Friday, U.S. markets changed their position as futures moved in the right direction. The yield on the 10-year Treasury note, which affects mortgage rates, dropped on the belief that lower inflation will allow the Federal Reserve to cut interest rates. Furthermore, the outlook for jobs is uncertain, with companies hesitant to add jobs, workers don’t have as much clout to demand pay raises. The AP noted that smaller pay increases may lower inflationary pressures as organizations tend to raise prices to neutralize higher wages. More wage growth is a key reason that many economists expect inflation to continue cooling in 2026.
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