Inflation came in below economists' forecasts and slowed from December's 2.7% annual rate.

Fed officials will get another month of inflation and employment data before their March meeting but are still expected to hold steady on adjusting the benchmark rate. Policymakers will want to

Core PCE prices accelerated to a 3% annual increase in December, hitting their highest level since February in a clear sign that inflation is staying stubbornly above the Fed's target of a 2% annual rate.

The January CPI came in at 2.4% but real-time data and a structural lag in shelter costs suggest headline inflation has further to fall.

An apparent slowdown in inflation since last fall has eased worries on Wall Street, but skeptics are yet to be convinced price pressures have largely evaporated. A new Federal Reserve study might add to the doubts.

The inflation reading, the lowest since May 2025, shows grocery, gas and rent prices are cooling.