Inflation rose just 0.2% in January from December and fell to 2.4% on an annual basis. Both readings were less than anticipated, in a positive sign for consumers.
Broadly, economists surveyed by Dow Jones expected inflation overall to have risen by 0.3% in January. On an annual basis, the expectation was that inflation would be tracking at 2.5%.
In recent months, as consumers face an affordability crisis, the Trump administration has rolled back tariffs on dozens of food items. The administration has also continued to reach trade deal frameworks with countries that it says will lead directly to lower tariffs.
The Bureau of Labor Statistics said that the price of housing “was the largest factor” in the increase for the month, rising 0.2%. The same went for the “food at home” category, which tracks grocery prices.
The price of energy was among the biggest drops in January, falling 1.5%.
Core inflation, which strips out volatile categories, was also right in line with expectations. That could help bolster the argument that recent rate cuts and actions by the administration are working to bring inflation under control after it soared to 3% in September last year.
There are some signs of significant tariff pass through to consumers, however, as many economists feared.
The price of laundry equipment and an index that tracks “other appliances” jumped 2.6% just from December to January.
Other indexes that rose sharply from month to month include those tracking the price of appliances overall, which rose 1.3%. Computers rose 3.1%, floor coverings jumped 3.2%, home furniture popped 1% and boys' apparel increased 2.4%.
The price of watches increased by 2.9% from month to month, and the reading that tracks video and audio equipment, including televisions, increased by 2.2%.
“You start to see some of the tariffs creep into some of the prices…and you see some sellers are deciding that they’re passing on those higher costs to consumers in the form of higher prices,” Amazon CEO Andy Jassy said on CNBC in mid-January. “I think you’re starting to see some more of that impact.”
Economists and analysts believe that companies may be nearing the end of pre-tariff priced products, which were made or imported before President Donald Trump's sweeping tariffs went into effect last year.
But it wasn’t all bad news.
The price of eggs, a major source of consumer complaints last year, dropped another 7% in January from December. The price of beef and veal, which has seen a rise over recent months, also declined by 0.4%.
Wells Fargo economists said they were encouraged by the data.
"Victory over inflation is not yet upon us," they wrote in a note. "That said, there are reasons to be optimistic about the outlook."
They noted disinflation in the primary shelter category and "few signs of an acceleration" in private sector rent measures as positive signs.
"Tariff-induced price hikes probably have not fully worked their way through the data, but we are closer to the end than the beginning of this source of higher prices," Wells Fargo's analysts concluded.
Friday’s report comes just two days after the delayed January jobs report, which looked positive for the month but included major revisions to recent hiring data that painted a gloomier picture.
Preliminary data had indicated that the U.S. economy added 584,000 jobs in 2025. But the Bureau of Labor Statistics revised the number down Wednesday to just 181,000 jobs.
The Federal Reserve has for months been balancing its two mandates — stable prices and full employment — on what some experts have described as a knife’s edge.
“Based on my forecast, we could be on hold for quite some time,” Federal Reserve Bank of Cleveland President Beth Hammack said Tuesday.
Hammack expects inflation to ease as the year progresses, but currently, she says, “inflation is still too high.”
