Additional Coverage:
Local Households Feel the Squeeze as Inflation Holds Steady at Year’s End
Local families continued to face persistent price pressures in the final month of 2025, as the Consumer Price Index (CPI) maintained an annual increase of 2.7%, matching the previous month’s rate. This figure aligns with economists’ predictions and caps a year where many residents felt the pinch of rising costs.
Key Figures:
- The CPI, which tracks the cost of a typical basket of goods and services, was anticipated to rise by 2.6% annually last month, according to financial data firm FactSet. The actual 2.7% increase signifies that price easing did not materialize further as the year concluded.
- “Core inflation,” which excludes the more volatile food and energy prices, saw a 2.6% increase over the past 12 months, according to the Bureau of Labor Statistics. This was slightly below the 2.7% increase predicted by FactSet economists.
Grocery Bills Continue to Climb:
Food prices saw a significant jump of 3.1% last month, accelerating from November’s 2.6% increase and marking the highest surge since August. This trend continues to be a major pain point for households, forcing many to stretch their budgets for essential staples.
Specific items that saw notable price increases compared to a year earlier include:
- Ground beef: Up 15.5%
- Coffee: Up 19.8%
- Bananas: Up 5.9%
In a bit of good news for shoppers, egg prices provided a rare reprieve, falling 20.9% from a year ago.
A Year of Resilience Amidst Lingering Costs:
While the 2.7% inflation rate remains well below the pandemic peak of 9.1% in June 2022, it closes out a year characterized by economic resilience alongside persistent price challenges. Despite inflation staying at or below 3% throughout 2025, prices continued to rise, making it harder for many to save for significant life goals like retirement or purchasing a home.
Even the Trump administration’s tariff announcements earlier in 2025, which some economists feared would reignite inflation, had a more muted impact than predicted. Many retailers absorbed some of these costs rather than passing them directly to consumers.
Fed’s Stance and Expert Outlook:
“Inflation remains a challenge, with core PCE inflation holding above the Federal Reserve’s 2% target for 55 months,” noted Seema Shah, chief global strategist at investment firm Principal Asset Management.
In the final months of 2025, the Federal Reserve cut rates three times to address a cooling labor market, even as inflation stayed above its 2% target. Fed Chair Jerome Powell indicated that labor-market headwinds outweighed the risk of renewed price pressures. The next Fed meeting is scheduled for January 27-28.
Analysts largely agree that inflation is unlikely to hit the 2% target in 2026, though it may gradually move in that direction. The cooler-than-anticipated core inflation, which rose 0.2% in December against an expected 0.3%, suggests a potential peak in core goods inflation.
However, the reality for consumers is that high costs persist in critical categories like food and shelter. “December’s CPI report reinforces price pressure is edging higher across key consumer product categories that matter most to consumers,” said Rob Holston, EY global and Americas consumer products leader.
Considering the latest inflation data and a jobs report showing a lower unemployment rate, experts believe the Federal Reserve is likely to keep interest rates steady at its upcoming meeting. Investors currently place a 95% likelihood that the central bank will maintain rates in the 3.5% to 3.75% range.