Consumer prices likely stayed elevated in December as data recovers from
shutdown
[January 13, 2026] By
CHRISTOPHER RUGABER
WASHINGTON (AP) — Inflation likely remained elevated last month as the
cost of electricity, groceries, and clothing may have jumped and
continued to pressure consumers' wallets.
The Labor Department is expected to report that consumer prices rose
2.6% in December compared with a year earlier, according to economists'
estimates compiled by data provider FactSet. The yearly rate would be
down from 2.7% in November. Monthly prices, however, are expected to
rise 0.3% in December, faster than is consistent with the Federal
Reserve's 2% inflation goal.
The figures are harder to predict this month, however, because the
six-week government shutdown last fall suspended the collection of price
data used to compile the inflation rate. Some economists expect the
December figures will show a bigger jump in inflation as the data
collection process gets back to normal.
Core prices, which exclude the volatile food and energy categories, are
also expected to rise 0.3% in December from the previous month, and 2.7%
from a year earlier. The yearly core figure would be an increase from
2.6% in November.
In November, annual inflation fell from 3% in September to 2.7%, in part
because of quirks in November's data. (The government never calculated a
yearly figure for October). Most prices were collected in the second
half of November, after the government reopened, when holiday discounts
kicked in, which may have biased November inflation lower.
And since rental prices weren't fully collected in October, the agency
that prepares the inflation reports used placeholder estimates that may
have biased prices lower, economists said.
Inflation has come down significantly from the four-decade peak of 9.1%
that it reached in June 2022, but it has been stubbornly close to 3%
since late 2023. The cost of necessities such as groceries is about 25%
higher than it was before the pandemic, and other necessities such as
rent and clothing have also gotten more expensive, fueling
dissatisfaction with the economy that both President Donald Trump and
former President Joe Biden have sought to address, though with limited
success.
The Federal Reserve has struggled to balance its goal of fighting
inflation by keeping borrowing costs high, while also supporting hiring
by cutting interest rates when unemployment worsens. As long as
inflation remains above its target of 2%, the Fed will likely be
reluctant to cut rates much more.
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A cashier rings up groceries in Dallas, Aug. 28, 2025. (AP Photo/LM
Otero, File)
 The Fed reduced its key rate by a
quarter-point in December, but Chair Jerome Powell, at a press
conference explaining its decision, said the Fed would probably hold
off on further cuts to see how the economy evolves.
The 19 members of the Fed’s interest-rate setting committee have
been sharply divided for months over whether to cut its rate
further, or keep it at its curent level of about 3.6% to combat
inflation.
Trump, meanwhile, has harshly criticized the Fed for not cutting its
key short-term rate more sharply, a move he has said would reduce
mortgage rates and the government's borrowing costs for its huge
debt pile. Yet the Fed doesn't directly control mortgage rates,
which are set by financial markets.
In a move that cast a shadow over the ability of the Fed to fight
inflation in the future, the Department of Justice served the
central bank last Friday with subpoenas related to Powell's
congressional testimony in June about a $2.5 billion renovation of
two Fed office buildings. Trump administration officials have
suggested that Powell either lied about changes to the building or
altered plans in ways that are inconsistent with those approved by
planning commissions.
In a blunt response, Powell said Sunday those claims were “pretexts”
for an effort by the White House to assert more control over the
Fed.
“The threat of criminal charges is a consequence of the Federal
Reserve setting interest rates based on our best assessment of what
will serve the public, rather than following the preferences of the
President,” Powell said. “This is about whether the Fed will be able
to continue to set interest rates based on evidence and economic
conditions—or whether instead monetary policy will be directed by
political pressure or intimidation.”
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