CPI outlook: December inflation likely to remain subdued as economic indicators normalize

December CPI Report: Inflation Trends and Market Expectations

The Consumer Price Index (CPI) data for December will be published on Tuesday morning, with analysts anticipating that inflationary trends remained consistent at the close of 2025.

According to Bloomberg, overall consumer prices are projected to have increased by 0.3% compared to the previous month and by 2.7% year-over-year in December. This annual rate would match November’s unexpectedly mild inflation reading.

For "core" CPI—which excludes the more unpredictable food and energy sectors—economists expect a 0.3% monthly rise and a 2.7% annual increase. The yearly figure would represent a slight acceleration from November’s pace.

Although inflation has consistently exceeded the Federal Reserve’s 2% target, it has gradually eased over the past year. Policymakers now view inflation as a less immediate threat to economic stability compared to the risks posed by a weakening job market.

This upcoming inflation report follows the recent December employment data, which revealed that the unemployment rate dropped from its highest level in four years. This development has reinforced investor expectations that the Federal Reserve will maintain current interest rates at its meeting later this month.

Leading up to the CPI release, CME Group data indicated that markets are assigning a 95% probability to the Fed leaving rates unchanged at the conclusion of its January 27-28 meeting.

Further reading: Understanding the connections between jobs, inflation, and Federal Reserve policy

Federal Reserve Leadership

US Federal Reserve Chair Jerome Powell addresses the media after a two-day Federal Open Market Committee meeting in Washington, D.C., on December 10, 2025. (Reuters/Kevin Lamarque)

Impact of Government Shutdown on Inflation Data

This Tuesday’s CPI release will be the first to return to its standard schedule after the US government shutdown disrupted the timing of September and November reports, which led to the cancellation of the October update. Some financial analysts believe that the effects of these disruptions may still be reflected in the latest figures.

Bank of America’s US economics team, led by Stephen Juneau, noted that the Bureau of Labor Statistics (BLS) used carry-forward imputation for November’s estimates due to the inability to collect October data during the shutdown.

They explained that in certain cities, where data is typically gathered in even-numbered months, August price data was carried forward to October. This could result in December’s inflation measure appearing higher, as December prices will be compared to August rather than October.

Consequently, Bank of America anticipates that headline CPI will rise by 0.4% from the previous month, exceeding the consensus forecast on Wall Street.

Barclays’ US economics team, represented by Pooja Sriram and Marc Giannoni, also cautioned that data collection challenges could push Tuesday’s inflation reading higher than expected.

Barclays projects that the next reliable inflation report will be released in March, when the BLS publishes data for February 2026.

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