US consumer inflation eases more than expected to lowest since May

The consumer price index (CPI) rose 2.4 percent year-on-year, the Department of Labor said, down from December's 2.7 percent and slightly below analysts' median forecast.

This was also the lowest level since May 2025.

Affordability worries have come to the fore in recent months as price increases in areas like food have weighed on households, and as President Donald Trump's tariffs flowed through the world's biggest economy.

Although tariffs have not triggered a broad inflation surge, firms have reported higher business costs. Many companies, however, have tried to soften the blow by stocking up on inventory ahead of planned levy hikes and avoided passing on additional hikes in full to consumers.

For now, CPI was up 0.2 percent on a month-on-month basis in January, inching down from December's 0.3 percent rise.

This was helped by a 1.5 percent month-on-month slide in overall energy costs, in part due to gasoline.

Food costs remained 0.2 percent higher than in December, although month-on-month increases have eased as well.

Food prices were up 2.9 percent from a year ago, the report said.

"This is encouraging news for many American families that have been struggling," said Navy Federal Credit Union chief economist Heather Long in a note.

US consumers in lower income groups have shown reluctance to fork out for non-essentials, the Federal Reserve noted last month.

"The tariffs have had a clear impact on products such as furniture and appliances, but the key items in many family budgets are cooling off," Long said.

"Gas prices, used cars and medical care all declined in January," she added.

Excluding the volatile food and energy sectors, "core" inflation was 2.5 percent, a touch below December's level.

Although overall inflation has cooled, underlying price pressures, coupled with a jobs market that has proven more resilient than expected, could allow the Fed to continue holding interest rates steady for a while.

Friday's inflation data caps a week of key economic releases, including an employment report which indicated stronger jobs growth in January than anticipated.

The US central bank made three rate cuts last year but has been holding off further action for now, seeking to bring inflation back down to officials' two-percent target.