Affordability: Inflation 'Unexpectedly' Keeps Dropping in January

It's not just luxury goods where prices keep unexpectedly dropping. And while people keep focusing on the inflationary aspects of Donald Trump's expansive tariffs, the actual inflation increases keep failing to materialize. 

For the fourth straight month, the Consumer Price Index (CPI) rate of inflation has fallen. In January, year-on-year CPI dropped to its lowest level since the tariffs hit in April, landing at 2.4% after a small monthly increase of 0.2%, both below analysts' expectations:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent on a seasonally adjusted basis in January, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.4 percent before seasonal adjustment. 

The index for shelter rose 0.2 percent in January and was the largest factor in the all items monthly increase. The food index increased 0.2 percent over the month as did the food at home index, while the food away from home index rose 0.1 percent. These increases were partially offset by the index for energy, which fell 1.5 percent in January.

The index for all items less food and energy rose 0.3 percent in January. Indexes that increased over the month include airline fares, personal care, recreation, medical care, and communication. The indexes for used cars and trucks, household furnishings and operations, and motor vehicle insurance were among the major indexes that decreased in January.

The all items index rose 2.4 percent for the 12 months ending January, after rising 2.7 percent for the 12 months ending December. The all items less food and energy index rose 2.5 percent over the last 12 months. The energy index decreased 0.1 percent for the 12 months ending January. The food index increased 2.9 percent over the last year.

Some of the decreases from December's report are notable, even in categories where prices still increased incrementally. Food went from +0.7 to +0.2, for instance. Energy prices actually dropped by significant amounts across the board, -1.5% overall and -3.2% for gasoline. Fuel oil fell 5.7% in January in a month where demand would be peaking. Electricity prices fell by a tenth of a point. Only natural gas showed a significant increase of 1.0% in January. 

However, the year-on-year numbers in CPI for the first twelve months of the Donald Trump administration look pretty spectacular when it comes to an affordability argument:

• Overall YoY inflation: 2.4%
• Food: 2.9%
  • Food at home: 2.1%
  • Food away from home: 4.0%
• Energy: -0.1%
  • Energy commodities: -7.3%
    • Gasoline: -7.5%
    • Fuel oil: -4.2%
  • Energy services: 7.2%
    • Electricity: 6.3%
    • Utility gas service: 9.8%
• Core CPI less food and energy: 2.4%

It's not perfect, but it's pretty darned good. The big problems here are electricity and gas, both of which the Trump administration is already working to expand. Trump and J.D. Vance want to reintegrate coal back into energy production and expand shale production through fracking to access both oil and natural gas. Those efforts should start to pay off in the coming year, and efforts to expand nuclear power will add even more supply for states that are smart enough to get on board. 

So what did analysts expect to see? The Wall Street Journal reports surprise among investors:

Friday’s Labor Department reading follows a better-than-expected January jobs report two days earlier. Combined, they are unlikely to budge the Federal Reserve from its current wait-and-see approach to interest rates.

Consumer prices rose 2.4% in January from a year earlier, cooler than the 2.7% recorded in December, the Labor Department said Friday. Economists surveyed by The Wall Street Journal had expected inflation of 2.5%.

Core prices, which exclude volatile food and energy items, rose 2.5% in January from a year earlier. Economists also expected those prices to rise 2.5%.

The latest annual number had some help, since a high inflation reading from January 2025 has now dropped out of the past 12 months of data. Month over month from December, consumer prices in January rose a seasonally adjusted 0.2% and core prices rose 0.3%.

CNBC's analysts seem pleasantly surprised, especially on shelter:

🚨 BREAKING: US inflation comes in BELOW EXPECTATIONS at just 2.4% year-over-year, another economic win for President Trump and Scott Bessent

CNBC: "A DOWNSIDE surprise!" 🔥

Just +0.2% over the month for January — ALSO below expectations

"A GOOD CPI number!" 🇺🇸 pic.twitter.com/2B4Vc9YHIj

— Eric Daugherty (@EricLDaugh) February 13, 2026

Shelter numbers have slowly come into alignment with overall inflation rather than driving overall CPI. That is a direct result of lowering demand by creating a net outflow of population through disincentives related to immigration enforcement. That trend should continue, which will hurt construction to some degree but will also provide some relief for younger Americans seeking independent living situations. 

It's another good signal that the economy is slowly returning to health based on supply-side economics and private-sector growth policies. Combined with this week's jobs report, Trump has more ammunition for the affordability argument and his midterm message of staying the course. 

Editor’s Note: Thanks to President Trump’s leadership and bold policies, America’s economy is back on track.

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