Inflation eased to an eight-month low in January, confirming a continued downward trend. Though most Consumer Price Index (CPI) components have resolved shutdown-related distortions from last fall, the shelter index will remain affected through April due to the imputation method used for housing costs. The shelter index is likely to show larger increases in the coming months.
While headline inflation moderated, underlying cost pressures from trade policy persist. In 2025, the average U.S. tariff rate rose from 2.6% to 13%. A recent New York Fed study found that 94% of tariff costs were passed through to U.S. companies and consumers during the first eight months of 2025. Households still face elevated costs for consumer goods even as the pace of price growth slows.
On a non-seasonally adjusted basis, the Consumer Price Index (CPI) rose by 2.4% in January compared to the year prior, according to the Bureau of Labor Statistics (BLS) latest report. That was the lowest level since May 2025. Excluding the volatile food and energy components, the “core” CPI increased by 2.5% over the past twelve months. A large portion of the “core” CPI is the housing shelter index, which increased 3.0% over the year. Meanwhile, the component index of food rose by 2.9%, and the energy component index fell by 0.1%.
On a monthly basis, the CPI rose by 0.2% in January (seasonally adjusted), and the “core” CPI increased by 0.3%.
The price index for a broad set of energy sources fell by 1.5% in January, with the increase in natural gas (+1.0%) offset by decreases in fuel oil (-5.7%), gasoline (-3.2%) and electricity (-0.1%). Meanwhile, the food at home index rose by 0.2%, while the food away from home index increased by 0.1% in January.
The index for shelter continued to be the largest contributor to the overall monthly increase in all items index. Other top contributors that rose in January included indexes for airline fares (+6.5%), personal care (+1.2%), recreation (+0.5%), medical care (+0.3%), and communication (+0.5%). Meanwhile, the index for used cars and trucks (-1.8%), household furnishings and operations (-0.1%), and motor vehicle insurance (-0.4%) were among the few major indexes that decreased over the month.
The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.2% in January. The index for owners’ equivalent rent (OER) and the index for rent of primary residence (RPR) both increased by 0.2% over the month. NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than core inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster than core inflation, the real rent index rises and vice versa. The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components).
In January, the Real Rent Index remained unchanged. The index has remained virtually flat since August 2025, except for data quality issues in October and November.