RBC Economics economists Nathan Janzen and Abbey Xu expect January U.S. headline inflation to slow on lower gasoline prices, while core inflation holds steady near 2.6%, keeping it above the Federal Reserve’s 2% target. They highlight persistent food and shelter price pressures and note that tariff passthrough remains limited but could build through producer prices and supply chains.

Core prices steady as food costs persist

"Headline U.S. price growth likely slowed in January, driven by a 3% seasonally adjusted pullback in gasoline prices from December. But, we look for core price growth to remain unchanged at 2.6%—stretching readings above the Fed’s 2% inflation target to almost five years."

"Tariff passthrough to consumer prices has been limited so far, but business surveys continue to flag further increases in the pipeline, and core producer price inflation continues to run well above consumer price growth (3.5% in December)."

"We look for food inflation to hold close to 3%. Measured year-over-year shelter inflation is still above 3% despite being lowered in November and December by a methodological quirk due to the U.S. government shutdown in October that should reverse by April."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)