By Harriet Torry
Consumer prices rose 2.7% in December from a year earlier, the Labor Department said Tuesday, unchanged from November.
Stripping out volatile food and energy costs, the core measure of consumer prices increased 2.6% over the year. That was also unchanged from November.
Economists surveyed by The Wall Street Journal had expected the consumer-price index to increase 2.7% over the year in December, and the core measure to rise 2.8%.
Federal Reserve officials have been divided over whether inflation or job-market risks should be their greater worry, and they will be watching Tuesday's report carefully to assess how much businesses are passing through tariff-related cost increases to their customers.
The Fed cut rates at three straight meetings to end 2025 as it sought to cushion a weaker labor market. But minutes from the Fed's December policy meeting showed some officials were reluctant to support more easing in the near future. The Fed next meets in two weeks' time.
The Fed and the Labor Department have come under unprecedented political pressure during the second Trump administration. The Labor Department was dragged into the political fray in August when President Trump fired its commissioner, saying without evidence that the jobs numbers were rigged to make him look bad. On Sunday, Fed Chair Jerome Powell accused the administration of using the threat of criminal prosecution to pressure the Fed into lowering rates.
Tuesday's report marks the first complete look at inflation trends in months. The Labor Department wasn't able to collect prices in the field during the government shutdown in the fall, and the agency had to use technical workarounds to deal with the missing data in the previous inflation report.
Economists have said that, as a result, the November inflation number that was released a month ago might have been artificially low. Economists cautioned that the December reading released Tuesday would likely reflect some payback for an understated November figure. (The Bureau of Labor Statistics has said it handled gaps in the price data as well as it could.)
High prices remain a top concern for many Americans, along with a cooling labor market. Though the rate of inflation has softened compared with a few years ago, prices for groceries, insurance and other necessities are much higher than they used to be.
The December CPI report closes out a year in which inflation was more benign than many predicted when the Trump administration first announced steep tariffs on imported goods in early 2025. Inflation did pick up over the summer, but not markedly.
Still, economists are interested to see how inflation will fare for January and February, since many businesses adjust their prices at the start of the year.
The consensus among economists is that inflation is likely to continue its meandering path lower this year, although there could be bumps in the road.
Tax cuts from the One Big Beautiful Bill Act risk stoking inflation in 2026, according to Joseph Brusuelas, chief economist at RSM.
The tax cuts "will just add a much stronger tailwind for upper-income households who clearly have the wherewithal to engage in experiential and service-related spending at a very robust level," he said. Continued strong business investment, particularly in artificial intelligence, could also drive up inflation this year, he said.
U.S. policymakers have spent years trying to bring inflation back down from its heights after the Covid-19 pandemic. Overall consumer inflation has cooled significantly from its recent peak of 9% in 2022. The last mile has remained tricky though, and inflation is still above the Fed's 2% year-over-year target.
Still, the current U.S. economy represents something of a split screen. While economic growth has remained solid, the labor market has cooled, shifting the Fed's focus from price pressures to jobs. Outside of the two most recent recessions, 2025 saw the lowest pace of average monthly job growth since 2003.
Write to Harriet Torry at harriet.torry@wsj.com
(END) Dow Jones Newswires
January 13, 2026 08:34 ET (13:34 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
