The Consumer Price Index for January showed annual inflation falling to 2.4 percent, down from 2.7 percent in December — its lowest reading in nine months. More notably, core inflation, which strips out volatile food and gas prices, also edged down to 2.4 percent from 2.6 percent. According to FactSet, that's the lowest core reading in nearly five years.
Month-to-month prices rose 0.2 percent. Gas prices fell. Grocery prices, however, ticked higher again.
Markets barely flinched. S&P 500 futures rose 0.1 percent, Nasdaq futures matched that, and the Dow Jones climbed a total of 9 points — a 0.02 percent move. Wall Street, it seems, had already priced in the good news.
A 2.4 percent annual inflation rate sounds encouraging in isolation. Compared to the 9.1 percent peak in 2022, it's a different universe. But zoom out five years, and the picture sobers up fast: overall consumer prices remain roughly 25 percent higher than they were before the pandemic spending spree began.
That's the number that matters at the kitchen table. A slowing rate of increase doesn't undo the damage already baked into rent, groceries, insurance, and every other line item American families confront monthly. Inflation cooling from catastrophic to merely elevated is not the same thing as relief — and voters demonstrated in November that they understand the difference.
The Daily Mail reports that the Federal Reserve's target remains 2 percent. At 2.4 percent, we're closer than we've been in years, but "closer" and "there" are not the same. The possibility of interest rate cuts later this year hinges on whether inflation continues drifting toward that target — a trajectory that is plausible but far from guaranteed.
There's a wrinkle in recent inflation data that deserves more scrutiny than it's received. A six-week government shutdown in the fall disrupted official data collection. In November, housing costs — one of the largest components of the CPI — were partly estimated rather than fully measured because of that disruption.
Housing is not a rounding error in the inflation index. It's the single largest expense for most households and a dominant driver of the overall number. When the government admits that a key input was estimated rather than observed, every downstream conclusion built on that data carries an asterisk. The November figures, by some economists' assessments, made inflation look lower than it actually was.
That matters when policymakers at the Fed are calibrating interest rate decisions based on trend lines that may be distorted by incomplete measurement. It also matters when media outlets trumpet "progress" on inflation without noting the data quality issues underneath.
Economists have warned that tariffs on imported goods could begin showing up more visibly in consumer prices. Many businesses have reportedly absorbed at least part of those costs so far. Whether that absorption continues depends on margins, competition, and the scope of trade policy going forward.
But the tariff-inflation narrative deserves healthy skepticism. Inflation surged to a four-decade high in 2022, years after the previous round of tariffs and driven overwhelmingly by pandemic-era monetary policy, supply chain collapse, and unchecked government spending. The idea that trade policy is the primary inflation risk, rather than the fiscal and monetary environment, inverts the actual hierarchy of causes.
Luke Tilley, chief economist at Wilmington Trust, offered a measured outlook:
"We're not expecting inflation to start up again by any stretch."
That's notable from someone whose job is to worry about exactly that. If the professionals managing institutional capital aren't sounding alarms, the breathless tariff-fear framing from certain quarters looks more like political positioning than economic analysis.
Here's the honest timeline:
The stall at 3 percent was the concern. Breaking below it and reaching 2.4 percent — particularly on the core measure — suggests the last mile of disinflation may finally be happening. That's genuinely positive.
But the 25 percent cumulative price increase over five years isn't going anywhere. Disinflation means prices rise more slowly. It doesn't mean they fall. The family paying a quarter more for groceries, housing, and utilities than they did in 2020 isn't made whole by a lower annual percentage on a government chart.
That gap — between the headline number economists celebrate and the lived experience households endure — is the defining economic reality of this era. One report doesn't close it. Neither does the next one.
