US Inflation Holds Steady at 2.7% to End 2025

The United States concluded 2025 with inflation holding steady at 2.7% in December. The Bureau of Labor Statistics released the consumer price index data, confirming that the rate matched both the forecast and November's increase. While the figure represents a decrease from the 2.9% rate recorded a year ago, it remains well above the Federal Reserve's long-term target.

This report offers greater clarity on price changes after the absence of October estimates. The data arrives just weeks before the Federal Reserve makes its first interest rate decision of the new year. Economists and traders widely expect the central bank to pause rate cuts, maintaining current levels as they assess the economic landscape.

The Bureau of Labor Statistics reported that the inflation rate remained unchanged at 2.7% in December. This stability aligns perfectly with market forecasts, providing a clear signal to investors and policymakers. The consistency follows a period of volatility where October year-over-year figures could not be calculated, leaving a gap in economic visibility.

Comparing the current data to previous periods highlights a cooling trend. The December rate of 2.7% is lower than the 2.9% recorded in December of the previous year. However, the persistence of inflation above the preferred target suggests that price pressures remain a concern for the economy.

The report is a critical piece of the puzzle for analysts tracking the consumer price index. It confirms that while prices are not accelerating rapidly, they are not falling back to target levels either. This distinction is vital for the next steps in monetary policy.

Recent economic indicators extend beyond inflation to include the health of the labor market. The US added 584,000 jobs throughout 2025. This figure represents a cooldown in job growth compared to the robust hiring seen in the years immediately preceding 2025.

Unemployment metrics showed resilience in December, remaining low. However, the rate was noted as higher than it was during the same month a year ago. This subtle shift in the labor market provides additional context for the Federal Reserve as it evaluates the overall economic health.

The combination of steady inflation and a cooling labor market creates a complex picture for policymakers. The Federal Reserve must balance the need to control prices against the risk of slowing economic growth too much.

The Federal Reserve is positioned to use these recent economic reports to guide its first interest rate decision of the year. The Federal Open Market Committee (FOMC) is scheduled to meet on January 27 and January 28. This meeting will be the first opportunity for the central bank to adjust policy in 2026.

Economists and traders are largely in agreement regarding the likely outcome. Expectations are that the FOMC members will hold interest rates steady. This would mark a pause after the Fed implemented three consecutive rate cuts before the end of 2025.

Market sentiment reflects this anticipation. CME FedWatch data indicated a 95% probability that the Fed would hold rates steady, even before the latest CPI report was released. This high level of confidence underscores the consensus that the central bank will take a wait-and-see approach in January.

The economic data released for December 2025 paints a picture of a US economy in transition. With inflation stabilizing at 2.7% and the labor market showing signs of moderation, the stage is set for a cautious Federal Reserve. As the central bank prepares for its late-January meeting, the steady but elevated price levels suggest that interest rates will likely remain unchanged in the near term.