Prices are still going up, but at a slower pace.
According to the Bureau of Labor Statistics, overall consumer prices rose 0.2% in January on a seasonally adjusted basis. Over the last 12 months, the CPI for all items is up 2.4%, down from 2.7% in December.
That slowdown is what people mean when they say inflation is easing. Your grocery bill, energy costs, and rent are still higher than a year ago. They are just not climbing as quickly as they were.
If you strip out food and energy, which move a lot month to month, the “core” CPI rose 0.3% in January and 2.5% over the year. This matters because the Federal Reserve watches this core trend when it thinks about interest rates. The Fed’s long-run goal is about 2% inflation, using a related price index, so the current CPI is now close to that zone.
Where prices are still rising
Food is one of the clearest pressure points. Over the past year, the overall food index has been up 2.9%. Food at home, which covers supermarket items, is up 2.1%. Some categories, such as cereals, bakery products, and nonalcoholic drinks, have climbed faster than that average.
Eating out is even pricier. The index for food away from home, which includes restaurants and takeout, is up 4.0% over the year. Full-service meals are up 4.7%, while limited-service meals are up 3.2%.
Shelter, which includes rent and owners’ equivalent rent, is another key driver. The shelter index rose 0.2% in January and 3.0% over the past 12 months. That may not sound huge, but housing is a big share of the typical household budget, so small changes here hit hard.
Medical care costs also nudged higher. The medical care index increased 0.3% in January, with hospital services up 0.9%. For families dealing with regular treatments or prescriptions, even modest increases feel very real.
Where are you seeing relief
Energy prices are the main source of relief right now. The overall energy index fell 1.5% in January and is down 0.1% over the year.
Gasoline stands out. Gas prices dropped 3.2% in January and are 7.5% lower than a year ago. That pullback has helped offset some of the pain from higher food and shelter costs.
Electricity and natural gas are a mixed story. Electricity prices are up 6.3% over the year, and natural gas is up 9.8%, even though the broad energy index is flat year over year. So you may notice cheaper gas at the pump, while your power or heating bill still feels heavy.
Some goods have also turned cheaper. Used cars and trucks, a big source of inflation after the pandemic, are now falling in price, with the index down 1.8% in January.
Why the CPI inflation rate is slowing
One reason the annual inflation rate dropped from 2.7% to 2.4% is something economists call a base effect. A year ago, prices were already quite high. When those large past increases roll out of the 12-month window, the percentage change looks smaller, even if monthly gains are still there.
At the same time, real progress is happening. Monthly increases have cooled from the sharp jumps seen in 2022 and early 2023. Food inflation is slower than before. Energy prices, especially gasoline, are not racing higher.
What this means for your budget
For most households, this report means the worst inflation spike is likely behind us, but the squeeze is not gone. Prices are now rising at something close to the Fed’s preferred pace, yet they are rising from a much higher base than a few years ago.
In practical terms, it may feel like this: you notice a bit of breathing room at the gas station, but grocery runs and rent still demand careful planning. If your wages have been moving up faster than 2 to 3% a year, you might finally feel like you are slightly pulling ahead. If not, the pressure can still feel constant.
The next few CPI releases will show whether this gentler path sticks. For now, the latest CPI inflation rate tells a cautious but hopeful story: price growth in the United States is slowing, and the economy is edging closer to stable, predictable inflation again.
