US Inflation Holds at 2.7% in December as Costs Stay Above Fed Target

America’s main price gauge still isn’t budging — and that’s both reassuring and annoying for policymakers. The Consumer Price Index (CPI) held steady at 2.7% year-over-year in December, matching November and landing exactly where economists expected, according to new BLS data released Tuesday. Core inflation — which strips out food and energy — ticked up slightly to 2.6%.

• Housing costs drove the headline higher, rising 3.2%, while groceries climbed 0.7% month-over-month — partly offset by used cars down 1%+ and flat new vehicle prices.
• Oxford Economics’ Michael Pearce believes inflation has likely “peaked,” noting that “tariff-driven price rises have mostly been passed through” and should keep easing toward the Fed’s 2% target.

Rate cut runaway: Wall Street expects the Fed to hold rates steady this month after three cuts in 2025, with futures markets pricing in just two reductions in 2026. Adding fresh uncertainty, the DOJ has opened a rare criminal probe into Fed Chair Jay Powell over a $2.5B HQ renovation — which Powell says is an attempt to pressure the Fed into cutting rates faster. Commerzbank’s Bernd Weidensteiner said inflation is still “tending to decline despite the tariff shock,” though shutdown-related data issues are “making interpretation difficult.”