Jan 2026: Annual Inflation Falls to 2.4% as Fed Balances Rate Cuts

The U.S. annual inflation rate slowed to 2.4% in January 2026 from 2.7% in December 2025, per the Labor Department. Economists expected 2.5%. Core inflation, excluding food and energy, rose 2.5%, in line with expectations. Seasonally adjusted, prices rose 0.2% MoM in January, and core prices 0.3%. The January report, delayed by a partial government shutdown, may see persistently lower housing price data depress year-over-year measures for months. The Federal Reserve aims to return inflation to 2% but has missed the target for about five years. Rate cuts totaling nearly 200 bps since summer 2024 were paused in January. With inflation easing and consumer price concerns lingering, central bank officials face a delicate balancing act in the latter half of Jerome Powell’s eight-year chairmanship.