Delayed CPI Report to Show Persistent Inflation

Key Takeaways

• The January inflation report, delayed due to the partial government shutdown, will likely show that inflation stayed roughly in line with December’s levels.
• Economists expect core goods inflation to rise as tariff costs are passed on to consumers.
• Bond futures markets remain split over whether the Fed will cut interest rates, given January’s stabilizing inflation and weak labor market.

Economists expect January’s Consumer Price Index report (delayed to Friday due to the partial government shutdown) to show continued inflation. Investors and consumers will have to get used to steady price growth this year, according to Natixis chief economist Christopher Hodge, especially as the Federal Reserve enters 2026 trying to balance above-target inflation with a soft labor market. “Ultimately, this is not a Fed that has a whole lot of conviction about bringing inflation back down to target,” Hodge says.

The January CPI data is releasing two days later than originally scheduled, due to the recent partial government shutdown. The shutdown also pushed the release of the January jobs report back five days to Wednesday morning. While the fall’s government shutdown created months of noisy inflation and labor data (including for December’s CPI report), analysts say this short-lived shutdown likely didn’t cause serious issues for January’s data. “I think this is going to be a comparatively clean report that’s pretty free of those distortions,” Hodge says.

Economists predict January price growth to pick up where 2025 left off, with headline inflation rising 0.3% month over month—the same as the December reading—and up 2.5% from year-ago levels, slightly down from last month. Forecasts hold that core CPI (which excludes volatile food and energy prices) rose 0.3% month over month, compared with 0.2% in December.

Hodge is also watching for increasing core goods inflation, while he forecasts housing and services inflation to be near flat. While core goods prices will put upward pressure on overall inflation, he says this trend isn’t likely to be a major concern. “I think that as long as inflation is not reaccelerating, the Fed’s going to attribute a lot of the inflation we’re getting right now to tariffs,” he explains. “They’re going to think that’s not that big a deal, since the tariffs aren’t going to last forever. They’re more concerned about the labor market.”

Bank of America analysts expect core goods to face upward pressure, with firms passing tariff-related costs to consumers rather than absorbing them, plus the typical January price reset, according to a client note from Feb. 6.

January CPI Report Highlights

• CPI report release date and time: Friday, Feb. 13 at 8:30 a.m. EST
• The CPI is forecast to rise 0.3% in January after rising 0.3% in December.
• Core CPI is forecast to rise 0.3% in January after rising 0.2% in December.
• The CPI year over year is forecast to rise 2.5% in January after increasing 2.7% in December.
• Core CPI year over year is forecast to rise 2.5% in January after increasing 2.6% in December.

Tariffs to Put Upward Pressure on Goods Prices

While last month’s data showed moderating goods prices, economists expect that number to tick up again at the start of 2026. “I think firms will use the change of the calendar to reset price levels, particularly for goods, a little bit higher,” Hodge says.

Ahead of December’s report, economists warned that the government shutdown and delayed data collection period would make November goods prices appear artificially low. Economists expected that this would have given a pop to core goods inflation for December. However, price growth for goods like used cars, household furnishings, and appliances lulled.

Hodge says December’s core goods reading was “curiously low.” He expects the script to flip with the new calendar year, which is normally when firms renegotiate supply contracts and reset price levels. He believes firms will also pass the costs of tariffs to consumers. “We’ve seen a lot of retailers say that eating these costs and compressing their own margins can’t go on forever,” he says.

What Does This Mean for the Fed?

Hodge believes a stable January inflation report on its own is unlikely to change the Fed’s decision at its March meeting, and that the spotlight is on the labor market.

Following the release of January’s stronger-than-expected jobs report on Wednesday, investors overwhelmingly expect the Fed to keep interest rates unchanged. About 94% of market participants anticipate interest rates staying in the 3.50%-3.75% range, with the remaining sliver predicting a quarter-point cut.

Looking ahead to the Fed’s March meeting, Hodge says labor data will be the key factor in the central bank’s decision on whether to cut interest rates: “This is a structurally dovish Fed that’s more likely to try to save the labor market than aggressively fight inflation.”