Economists say December consumer prices rebounded after shutdown distortions

U.S. consumer prices rose 0.3% in December, bringing the 12‑month increase in the Consumer Price Index to 2.7%, as data collection disruptions tied to a 43‑day federal shutdown in November unwound and several volatile components pushed monthly inflation higher. Core CPI, which strips out food and energy, rose 0.2% for the month and 2.6% year over year, slightly softer than some forecasters had predicted.

A survey of economists published Jan. 13 had forecast a 0.3% monthly gain for both headline CPI and core CPI as price measurement returned to a normal schedule after the shutdown forced the Labor Department’s Bureau of Labor Statistics to impute some October prices and delay field collection until late November. That delayed collection coincided with Black Friday sales and other holiday discounting, factors analysts say artificially suppressed November readings, particularly for shelter measures.

Economists saw a payback in December. Shelter costs rose 0.4% month to month, food prices climbed 0.7%, and energy increased 0.3%—moves that together explained much of the headline advance. Forecasters also flagged higher electricity costs tied to data center usage as a specific upward contributor. Goods prices were expected to rebound more sharply than services because holiday discounting had disproportionately hit retail items, while seasonal rebounds were likely in lodging and airfares.

“We expect the CPI report to show a meaningful payback after collection issues, due to the government shutdown,” said Oscar Munoz, chief U.S. macro strategist at TD Securities, while cautioning the reversal will be incomplete because some rent payback “will have to wait until the April 2026 report.” Economists at Wells Fargo noted that most, though not all, shutdown‑related distortions should be unwound in December’s data and said services price growth could show selective bounce in seasonally sensitive categories.

The December figures have important policy implications. By reversing November’s apparent soft patch, the numbers reinforced market and economist expectations that the Federal Reserve will likely keep its policy rate unchanged at the January meeting. Analysts cautioned, however, that the monthly rebound partly represents a statistical correction and that year‑over‑year comparisons remain influenced by methodological quirks in how the BLS measures housing inflation.

Beyond the shutdown noise, several economists flagged an ongoing, gradual pass‑through of tariffs to consumer prices. Firms have absorbed some import duties to date, muting immediate effects, but analysts expect tariffs to continue exerting modest upward pressure on inflation in the absence of offsetting forces. That upward pressure is likely to be countered over 2026 by moderating rent increases, keeping a downward trajectory for headline inflation across the year if core services inflation softens as anticipated.

For markets, the December CPI damped hopes for fresh disinflation that could have prompted quicker rate cuts. For policymakers, the report underscores the challenge of separating transitory measurement distortions from underlying price trends—an interpretation that will shape Fed deliberations as officials weigh the timing and pace of any future easing.