The final December 2025 Consumer Price Index (CPI) report is anticipated to provide a clearer understanding of inflation for the year, following disruptions to data collection caused by the longest U.S. government shutdown. While the report is expected to show a gradual easing of inflation on paper, with a projected annual increase of about 2.8% for the twelve months ending in December, many Americans continued to experience the effects of high prices. Key price changes observed during 2025 included falling gasoline prices but rising electricity costs, and decelerating asking rent prices, even as grocery affordability remained a challenge for most households.
Although inflation in 2025 remained significantly below the peaks of 2022 and 2023, it proved more persistent than many forecasts predicted, staying above the Federal Reserve's target of 2% throughout the year. Consumer expectations, as indicated by the New York Fed's December 2025 Survey of Consumer Expectations, suggest a belief that prices will continue to rise in 2026, with near-term inflation expected to reach 3.4%. Some economists attribute these expectations to affordability pressures and a "K-shaped economy," where higher-income households see asset growth and continued spending, while lower-income households face challenges due to wage growth lagging behind productivity. The upcoming year might offer some financial relief through larger tax refunds, due to a higher standard deduction, expanded credits, and unchanged withholdings.
The December CPI report is expected to correct distortions from the government shutdown, offering a more accurate picture of price changes, particularly in goods and services. Factors influencing inflation throughout 2025 included trade uncertainty, which led consumers to make purchases of items like cars and electronics before tariffs took effect, thus driving up prices amid tight supply. Analysts highlight housing, wages, and energy prices as crucial areas to monitor, as they significantly impact the CPI and have ripple effects on other goods and services. Despite these pressures, cooling housing inflation, lagging wage growth, and low gas prices are seen as pointing towards continued inflation cooling through 2026.
Regarding monetary policy, Federal Reserve policymakers will consider the December CPI report ahead of their January meeting. The recent December jobs report, which indicated a fall in the unemployment rate, has reduced the likelihood of an additional interest rate cut in January. Forecasters do not anticipate further rate reductions, expecting instead that the committee will assess the economic impact of the three consecutive rate cuts that occurred late last year.