U.S. consumer prices likely accelerated in December 2025. A 43-day federal government shutdown had distorted earlier inflation readings. The Bureau of Labor Statistics (BLS) could not collect October price data during the shutdown. So it used a carry-forward method to estimate missing figures—especially for housing costs. That led to artificially low inflation in November. Full data collection resumed in December, triggering a rebound in U.S. consumer prices.
Housing costs saw the biggest distortion. Rent and owners’ equivalent rent make up about one-third of the Consumer Price Index (CPI). The BLS collects this data using a six-month panel system. Because October’s panel was missed, the agency couldn’t fully correct the gap until April 2026. Still, partial updates in December pushed the index higher. Economists surveyed by Reuters expect the CPI rose 0.3% month-over-month in December. That would keep annual inflation at 2.7%, matching November’s rate but better reflecting real conditions.
Goods prices also climbed. Categories like new motor vehicles, furniture, and apparel likely saw increases. Retailers offered deep holiday discounts in November, which temporarily lowered prices. Those deals faded in December. Energy costs rose too—especially electricity, driven by surging demand from AI data centers. Food prices stayed high due to supply chain issues and bad weather in key farming regions.
Core U.S. consumer prices, which exclude food and energy, probably increased 0.3% in December. That would lift year-over-year core CPI to 2.7%, up from 2.6% in November. The modest rise shows underlying inflation remains stubborn. Services inflation likely bounced back as well. Travel-related categories—like airfares and hotel stays—often dip in November but rebound in December.
The Federal Reserve watches the Personal Consumption Expenditures (PCE) price index more closely than the CPI. But the December CPI report still matters. It supports expectations that the Fed will hold rates steady at its January 27–28 meeting. Officials plan to keep the benchmark rate between 3.50% and 3.75%. They want clearer proof that inflation is sustainably cooling before cutting rates.
Political tensions add uncertainty. Rising U.S. consumer prices have hurt President Donald Trump’s approval ratings. Inflation will likely become a major issue in the 2026 congressional elections. Meanwhile, the Trump administration opened a criminal investigation into Fed Chair Jerome Powell. Powell called it a “pretext” to pressure the central bank into lowering rates. He warned that such actions threaten economic stability.
Economists say political chaos could fuel more inflation. “Washington keeps creating manufactured uncertainties,” said Sung Won Sohn, a finance professor at Loyola Marymount University. “That hurts the economy and could push inflation higher.” Businesses already face higher costs from Trump’s tariffs. If policy instability continues, they may pass even more expenses to consumers.
Some of December’s price jump reflects data corrections—not true overheating. But it shows how fragile inflation progress remains. The BLS won’t fully resolve housing data gaps until April 2026. Until then, early CPI reports may swing due to technical quirks, not market shifts. The Fed will likely stay cautious and avoid reacting to noise.
For now, U.S. consumer prices appear stable near 2.7%. That keeps the Fed on hold in early 2026. Any policy shift will require consistent evidence of cooling inflation. The coming months must deliver that clarity—without another government shutdown or political interference.
