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A key measure of inflation fell to nearly a five-year low last month as apartment rental price growth slowed and gas prices fell, offering some relief to Americans grappling with the sharp cost increases of the past five years.
Inflation dropped to 2.4% in January compared with a year earlier, down from 2.7% in December and not too far from the Federal Reserve’s 2% target. Core prices, which exclude the volatile food and energy categories, rose just 2.5% in January from a year ago, down from 2.6% the previous month and the smallest increase since March 2021.
Friday’s report suggests inflation is cooling, but it comes after the cost of food, gas and apartment rents soared after the pandemic, with consumer prices about 25% higher than they were five years ago. The increase in such a broad range of costs has become a high-profile political issue under the rubric of “affordability.”
On a monthly basis, consumer prices rose 0.2% in January from December, while core prices rose 0.3%. Core inflation was held down by a sharp drop in the price of used cars, which fell 1.8% just in January from December.
Gas prices fell 3.2% last month, the third drop in the past four months, and are down 7.5% from a year earlier. Grocery prices increased 0.2% in January, after a big 0.6% rise in December, and are up 2.1% from a year ago.
If inflation gets closer to the Federal Reserve’s target of 2%, it could allow the central bank to cut its key short-term interest rate further this year, as Trump has repeatedly demanded. High borrowing costs for things like mortgages and auto loans have also contributed to a perception that many big-ticket items remain out of reach for many Americans.
