The Consumer Price Index rose at an annual rate of 2.7% in the final month of 2025, in line with economists’ forecasts, capping a year when many Americans felt squeezed by price pressures.
By the numbers
The CPI was expected to rise 2.6% on an annual basis last month, according to economists surveyed by financial data firm FactSet.
The CPI tracks the changes in a basket of goods and services typically bought by consumers, such as food and apparel.
The latest CPI reading closes out a year marked by economic resilience alongside lingering price pressures. Inflation stayed at or below 3% throughout 2025, well below the pandemic peak of 9.1% in June 2022.
Even so, the CPI climbed for several months in 2025 in the wake of the Trump administration’s tariff announcements, although the levies didn’t reignite inflation to the extent that some economists had predicted. The tariff impact was more muted on inflation than predicted because many retailers swallowed some tariff costs rather than passing them on directly to customers.
However, cooling inflation did not translate into price relief. Prices continued to rise, leaving many households feeling pinched and complicating efforts to save for retirement or buy a home.
“Inflation remains a challenge, with core PCE inflation holding above the Federal Reserve’s 2% target for 55 months,” noted Seema Shah, chief global strategist at investment firm Principal Asset Management, in a Tuesday email.
The Federal Reserve cut rates three times in the final months of 2025 to counter a cooling labor market, despite inflation remaining above the central bank’s 2% target. Fed Chair Jerome Powell said labor-market headwinds outweighed the risk of renewed price pressures. The next Fed meeting is scheduled for Jan. 27 to 28.