U.S. Consumer Price Index (January 2026)

CPI slows to 2.4% in January, but there remains upside risk in the month's ahead

• The Consumer Price Index (CPI) rose 0.2% month-on-month (m/m) in January, one-tenth below the consensus forecast in Bloomberg. On a twelve-month basis, CPI was up 2.4% (down from 2.7% the month prior). 
  • Energy costs fell 1.5% m/m, thanks to a sharp pullback in prices at the pump (-3.2% m/m). Food prices (0.2% from 0.7% in December) also moderated in January.
• Excluding food and energy, core inflation rose 0.3% m/m, following softer gains the two prior months and more than the 0.2% m/m average increase over the prior twelve-month period. However, favorable base effects pushed the year-on-year change down to 2.5% (from 2.6% in December).  
• Price growth on services heated up, rising 0.4% m/m, or the fastest monthly increase since July 2025. Primary shelter costs came in on the cooler side – rising 0.2% m/m – while price growth of non-housing services firmed. Air fares (+6/5% m/m) rose sharply last month, while most other categories tied to discretionary spending were higher. 
• Core goods prices were flat for a second consecutive month, as a sharp pullback in used vehicle prices (-1.8% m/m) offset smaller gains in household furnishings, apparel, medical commodities, and recreational goods.

Key Implications

• All told, January's inflation report came in a touch cooler than expected. But there were plenty of cautionary signs for the months ahead. Core goods would have firmed if not for the sharp pullback in used vehicle prices, as most other categories showed price growth last month. Moreover, the softer gain in primary shelter could still be related to post-government shutdown distortions (see Q&A Question 3), suggesting there could be some giveback in the months ahead. 
• We expect some firming in inflationary pressures over the coming months, as businesses continue to pass on increasingly more of the tariff cost. There's also a risk of a stronger demand-side push on inflation, as OBBBA tax cuts, easier financial conditions, and a stabilizing labor market provide tailwinds to consumer spending. It's for this reason that we think that the Fed will stay on the sidelines until at least the summer. 

Disclaimer

This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.