EconoFACTS

February 13, 2026 | 09:10

U.S. Consumer Inflation Nears Five Year Low

Economist

Senior Economist and Director
Economics

Sal Guatieri is a Senior Economist and Director at BMO Capital Markets, with over two decades experience as a ma... (Read more)

Sal Guatieri

Senior Economist and Director
Economics

Sal Guatieri is a Senior Economist and Director at BMO Capital Markets, with over two decades experience as a ma... (Read more)

U.S. consumer inflation eased further in January, though likely not enough to spur near-term Fed easing. Consumer prices rose 0.2%, helped by cheaper gasoline and a rare dip in electricity costs. Food cost increases decelerated to a 0.2% advance, with grocery bills now up a more normal 2.1% y/y. Shelter costs also simmered down, rising 0.2% in the month, amid easing pressure on rents. A further reversal in used vehicle prices was countered by soaring airline fares (6.5% m/m). The CPI annual rate dropped three tenths to 2.4%, the lowest since last spring.

Core prices showed a little more heat than the headline figure, rising 0.3% m/m, as expected. Still, the yearly core rate eased to 2.5%, the lowest since March 2021 and a major improvement from 2022's peak of 6.6%. Waning tariff effects were suggested by core goods prices holding steady for a second straight month, allowing the yearly rate to slip to 1.1%. Although services prices, excluding energy and rents, spiked 0.6% m/m, the year-over-year rate (2.7%) is the lowest in over four years. This metric also spiked at the start of each of the previous two years, suggesting faulty seasonal adjustment might be a factor. Look for a calmer print in February.

Bottom Line: Although measured CPI inflation is somewhat understated because of October’s shutdown-related distortions, it seems to be moving in the right direction—toward the 2% target—as both tariff effects and labour market pressures subside. Still, the FOMC will likely seek further confirmation that inflation is making sustained progress before resuming rate cuts, likely this summer.

Table 1 - United States — CPI

(month/month % change : s.a.)

Source: BMO Economics, Haver Analytics