U.S. Inflation Likely Picked Up in December as Shutdown Distortions Fade

U.S. consumer prices likely accelerated in December as temporary distortions caused by the 43-day government shutdown began to unwind, strengthening expectations that the Federal Reserve will keep interest rates unchanged this month. The shutdown delayed price collection for October, forcing the Bureau of Labor Statistics (BLS) to use a carry-forward imputation method—especially impacting rent data—while November prices were collected later in the month when retailers were offering heavy holiday discounts.

According to a Reuters survey of economists, headline CPI is expected to have risen 0.3% in December, driven by higher food and energy prices, particularly electricity demand linked to data centers. On an annual basis, inflation is projected to stay at 2.7%, unchanged from November. Economists expect a broad price increase, notably in goods such as new motor vehicles, furniture, and apparel, while rent measures may remain softer until the affected housing panel rotates back in April 2026.

Core inflation, which excludes food and energy, is also forecast to rise 0.3% month-on-month, with the annual core CPI expected to edge up to 2.7% from 2.6%. The Fed, which targets inflation using the Personal Consumption Expenditures (PCE) index, is widely expected to keep its benchmark overnight interest rate in the 3.50%–3.75% range at its January 27–28 meeting. Ongoing political pressure and tensions involving Fed Chair Jerome Powell and President Donald Trump have added uncertainty, with economists warning that Washington-driven disruptions could complicate inflation trends in 2026.

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