U.S. December CPI Steady at 2.7% But Core Inflation Fell Short

The U.S. Consumer Price Index rose 0.3% month-over-month in December 2025, matching expectations but revealing softer underlying price pressures as core inflation came in below forecasts, according to data released by the Bureau of Labor Statistics.

Services and food led price increases while goods inflation remained flat for the month. Shelter continues to be the primary driver of inflation persistence, though the annual rate of 3.2% represents continued gradual deceleration from earlier peaks.

Key Points

• Headline CPI: Rose 0.3% monthly (matching expectations) and 2.7% annually (in line with forecasts)
• Core CPI: Increased 0.2% monthly (below 0.3% consensus) and 2.6% annually (below 2.7% expectations) — the lowest annual rate since March 2021
• Shelter inflation: Advanced 0.4% monthly, contributing the largest factor to the overall increase, while annual shelter inflation decelerated to 3.2% from 3.3% in November
• Food prices: Jumped 0.7% for the month, though egg prices plummeted 8.2% as avian flu concerns eased
• Energy: Rose 0.3% monthly with gasoline declining 0.5%, while natural gas surged 4.4%
• Recreation: Posted a record 1.2% monthly increase, the largest gain since the index began in 1993

Despite ongoing concerns about the inflationary effects of the Trump administration’s tariff policies, the December data showed limited evidence of significant pass-through to consumer prices. Apparel posted gains of 0.6%, but many import-sensitive categories remained relatively stable.

Link to official BLS U.S. CPI Report (December 2025)

Real wages were flat for the month and rose 1.1% from a year ago when adjusting for inflation, the BLS reported separately, suggesting purchasing power has stabilized following the post-pandemic inflation surge.

While the December data was encouraging, inflation remained above the Fed’s 2% target and the three-month annualized rate of core CPI stood at approximately 2.4%, suggesting price pressures remain elevated despite the gradual moderation.

Market Reaction

United States Dollar vs. Major Currencies: 5-min 

USD, which had slowly been treading higher leading up to the CPI release, showed a brief bearish reaction against major currencies in the immediate aftermath of the release. The initial dip was likely due to softer-than-expected core reading suggesting that the Federal Reserve may have more flexibility on monetary policy than previously thought.

However, the USD quickly recovered ground an hour or so after the report as investors digested the details, noting that shelter costs, which account for over one-third of the CPI weighting, remained elevated despite the modest deceleration.

By session’s end, USD had pulled above pre-CPI levels across the board, chalking up notable gains against NZD (+0.62%) and CHF (+0.36%) while keeping rallies limited against CAD (+0.06%) and JPY (+0.11%).