The Consumer Price Index (CPI) report for December 2025 offers encouraging signs of progress in the ongoing battle against inflation. Peak inflation may be behind us. Analysts across the board project inflation to keep heading in the right direction, eventually getting as low as 2% by 2026. Further, the report reaffirms that core and headline inflation metrics are gradually stabilizing. This trend suggests a tentative dousing of the inflation flames in the coming months.
In December that headline Consumer Price Index (CPI) leapt up by 0.31%. Excluding food and energy, the core CPI rose 0.24% at the same time. The core CPI year-over-year remained unchanged at 2.6%. This constitutes a drop from 3.2% in December 2024 and represents notable progress from the high of 3.1% set in August of this year. That long-term slowing down shows that the Fed’s progress on monetary policy to bring inflation down has been successful.
Core Goods and Commodities
The report points out that core goods inflation had a lesser-than-anticipated jump back upward in December. In other words, consumer demand is not the primary factor pushing prices upward as some had worried. The core CPI came in 12 basis points lower than analysts were forecasting. This decrease is additional evidence that inflationary pressures are starting to recede.
Food and energy commodities have had very modest underlying inflation trends. Food prices jumped 0.7% just for the month of December alone, bringing the year-over-year food inflation to 3.1%. In contrast, energy commodity prices fell by 3.0% on the year, with energy inflation at 0.3% for December. Overall, these numbers paint a picture that core inflation, especially food prices, are increasing moderately, while energy price increases are starting to reverse.
Year-Over-Year Trends
Electricity prices tell a much direr story, raising by 6.7% YoY. While this huge jump goes against the trend seen in other energy commodities, it is still a major component driving up inflation measures overall. These contrasting signs throughout the different sectors of the economy point to continued uncertainty and complications across our economic landscape.
In all, the CPI report for December paints a slightly optimistic picture of inflation trends. Some analysts are convinced that core inflation has plateaued. With stunning commodity volatility of 2022 behind us, attaining that 2% target by 2026 seems more and more realistic.