Consumer prices rose just 2.4% year-over-year in January, undershooting the 2.5% economists had projected and marking a 0.3 percentage-point drop from the prior month. Core inflation — stripping out food and energy — landed at 2.5%, its lowest reading since April 2021. Both figures came in below what Wall Street expected.

The Bureau of Labor Statistics released the January CPI report on Friday, delayed a few days by the partial government shutdown. What it delivered was the clearest signal yet that the inflation beast that ravaged American household budgets is being dragged back toward its cage.

The Numbers That Matter at the Kitchen Table

According to CNBC, the monthly all-items CPI ticked up just 0.2%, below the 0.3% forecast. Energy prices fell 1.5%. Egg prices — which became a cultural flashpoint over the past year — dropped 7% for the month and are down 34% over the past year. Used cars and trucks fell 1.8%.

Shelter costs, which make up more than a third of the entire CPI and have been the stickiest driver of inflation, rose only 0.2% monthly with an annual rate of 3%. That's meaningful. When rent cools, the broadest category in the index loses its ability to prop up the headline number.

Food prices rose 0.2% monthly, with five of six major grocery categories posting gains. Airline fares jumped 6.5%. New vehicles edged up 0.1%. Not every line item is moving in the right direction — but the overall trajectory is.

Heather Long, chief economist at Navy Federal Credit Union, framed it plainly:

This is great news on inflation. Inflation fell to the lowest level since May and key items such as food, gas and rent are cooling off. This will provide much needed relief for middle class and moderate-income families.

The Tariff Question — Answered, Not the Way Critics Expected

Economists had expected President Trump's tariffs, announced on U.S. imports in April 2025, to spark inflation. That was the consensus prediction, repeated with the confidence of people who mistake their models for reality. The January inflation rate now sits at the same level it was the month after those tariffs were announced.

The tariffs didn't vanish. They're still operating in the economy. But the catastrophic price spiral that was expected hasn't materialized. Long acknowledged the nuance:

The tariffs have had a clear impact on products such as furniture and appliances, but the key items in many family budgets are cooling off.

Furniture and appliances absorbed some tariff impact. Groceries, gas, and rent did not spiral. The distinction matters enormously — and it's one the critics consistently refused to make. Trade policy has costs, and nobody serious denies that. But the sweeping prediction that tariffs would reignite broad-based inflation has collided with data that says otherwise.

Bessent's Growth Argument

Treasury Secretary Scott Bessent went on CNBC Friday and made a case that deserves more attention than it will get from outlets still searching for bad news. He challenged the prevailing assumption that economic growth must be suppressed to tame prices:

We've got to get away from this idea that growth automatically has to be tampered down, because growth, per se, is not inflationary. It's growth that leaks into areas where there's not sufficient supply, and everything this administration is doing is creating more supply.

This is the supply-side argument distilled to its core. The administration's posture isn't demand suppression — it's capacity expansion. Bessent sees an "investment boom" acting as a tailwind while inflation returns to the Fed's 2% target by mid-year.

The Atlanta Fed's GDPNow tracker pegs fourth-quarter GDP growth at 3.7%. The economy had a slow start in 2025 but has been accelerating since. Consumer spending held up fairly well, even if it went unexpectedly flat heading into the holiday season. The labor market added only 15,000 jobs per month last year — a soft patch that makes the GDP number all the more striking. Growth is coming from productivity and investment, not just hiring.

That's exactly the kind of growth Bessent is describing. And it's exactly the kind of growth that doesn't automatically feed inflation.

What Comes Next for the Fed

Traders moved quickly. The odds of a Fed rate reduction in June jumped to roughly 83% on the CME Group's FedWatch tool after the report landed. The Fed already executed three rate reductions in the latter part of 2025 before pausing, and is widely expected to stay on hold until at least June.

The composition of the Fed is shifting, too. Chair-designate Kevin Warsh is likely to push for lower rates, while rotating regional Fed presidents have tilted toward a more aggressive posture on fighting inflation. That tension will play out over the coming months — but January's data hands the doves real ammunition.

The Commerce Department releases the December reading of its preferred inflation gauge, the personal consumption expenditures price index, on February 20. If it confirms the CPI's trajectory, the case for a June cut becomes difficult to resist.

The Bigger Picture

For two years, Americans were told that the only path back to 2% inflation ran through recession, job losses, and pain. That was the implicit promise of the "soft landing" skeptics — that the economy would have to break before prices normalized. The administration rejected that framework. Bessent is rejecting it explicitly, on the record, on national television.

January's CPI doesn't mean the fight is over. Core inflation at 2.5% is still above the Fed's 2% target. Grocery prices are still climbing, even if slowly. Airline fares spiking 6.5% in a single month reminds everyone that disinflation isn't linear.

But the direction is unmistakable. Inflation is falling. Growth is running near 4%. The tariffs didn't break the economy. The American consumer is still standing.

That's not spin. That's the data.