The US ended 2025 with steady but elevated inflation in December

• The inflation rate remained at 2.7% in December, matching expectations.
• The report provides greater clarity on price changes, following the absence of an October estimate.
• The Federal Reserve can use the new data to inform its first interest rate decision of the year.

The US ended 2025 with a lower inflation rate, but it was still far above the Federal Reserve's target.

The year-over-year inflation rate was 2.7% in December, the same as the forecast and November's increase, and down from the 2.9% a year ago.

After most October year-over-year figures couldn't be calculated because of data collection issues during the government shutdown, the new report brings a little more clarity to how quickly prices have changed in the last few months of the year.

Core CPI, which excludes volatile food and energy prices, rose 2.6% from a year ago, just below the 2.7% forecast and matching November's 2.6% increase.

Both overall and core CPI were expected to rise 0.3% over the month. Headline CPI matched that expected 0.3% increase, holding steady from September, the last month with an available change. Core CPI increased 0.2%, as it did in September.

"Economists were worried about some statistical resets after the government shutdown, but the bigger disinflation trend continued," David Russell, global head of market strategy at TradeStation, said. "Cars and energy saved the day even as shelter ticked back up."

Last Friday's jobs report also indicated how the economy has changed in 2025. The US added 584,000 jobs in 2025, a cooldown from job growth over the previous few years. Unemployment remained low in December but was higher than a year ago.

The Federal Reserve will be able to use these economic reports to make its interest rate decision. Economists and traders expect Federal Open Market Committee members, who will meet January 27 and January 28, to hold interest rates steady after three straight cuts before 2025 ended.

CME FedWatch indicated a 95% chance after the CPI report that the Fed would hold interest rates steady.

The next few months are set to bring big changes to the Fed. Jerome Powell's term as Federal Reserve Chair ends in May, and his term on the Board of Governors ends in 2028. On Sunday, Powell said the Department of Justice served the Fed with grand jury subpoenas, which are related to testimony Powell gave last June about renovations to Fed buildings. International central bankers said they "stand in full solidarity" with the Fed and Powell.

"I have served at the Federal Reserve under four administrations, Republicans and Democrats alike," Powell said in a video statement. "In every case, I have carried out my duties without political fear or favor, focused solely on our mandate of price stability and maximum employment."

This is a developing story. Please check back for updates.