(NewsNation) — Americans ended 2025 feeling down about the economy, and the latest inflation report highlights the trade-offs households are facing.
Grocery prices jumped 0.7% from November to December, the biggest monthly increase since Aug. 2022, according to new Labor Department data. At the same time, gas prices moved in the opposite direction, falling from the prior month and running 3.4% lower than a year earlier.
Overall, consumer prices rose 2.7% in December from a year earlier, unchanged from November and roughly in line with economists’ expectations.
While that’s still above the Fed’s 2% target, inflation ended 2025 lower than it began the year, easing from a 3.0% annual pace in January.
“Distortions caused by the government shutdown have made the inflation data harder to interpret, but the recent run of figures suggests inflation has peaked,” Michael Pearce, chief U.S. economist at Oxford Economics, said in a statement Tuesday.
Here’s a closer look at what the latest Consumer Price Index means for families and where price pressures persist.
The Good News
- Tariff-driven inflation may have peaked: The inflationary impact of President Donald Trump’s tariffs has been more modest than initially feared, and Oxford Economics’ Pearce thinks the worst may already be over.
- “We think tariff-driven price rises have mostly been passed through and anticipate further disinflation in services inflation in 2026,” he said.
- Consumers are seeing relief in several categories: Slower inflation doesn’t mean prices will come down, but in some categories, they are.
- Airfares were down 3.4% in December from a year earlier
- Egg prices were down more than 20% from December 2024
- Gas prices dropped 3.4% year-over-year
- Auto insurance inflation, while still elevated, has eased from recent highs
The Bad News
- Grocery prices accelerated: Food at home prices rose 0.7% from November to December, the largest month-over-month increase since August 2022. On an annual basis, those prices were up 2.4% from a year earlier.
- Two categories to watch: Beef and veal prices rose 16.4% in Dec. from a year earlier, while coffee was up 19.8%.
- Utility costs remain a pressure point:
- Electricity: +6.7% in Dec. 2025 from a year earlier
- Natural gas (piped): +10.8% in Dec. 2025 from a year earlier
The data so far suggests the Federal Reserve’s recent rate cuts have not reignited inflation. Still, policymakers are expected to remain in a wait-and-see mode, likely leaving rates unchanged at this month’s meeting.
“There is nothing in this report that would prompt Fed policymakers to step off the pause bench and favor a rate cut at the upcoming FOMC meeting,” Gregory Daco, chief economist at EY-Parthenon, said in a statement.