Key takeaways

• Core inflation fell to 2.5%, its lowest reading since April 2021.
• Grocery prices rose 0.2% in January, with coffee (+18.3%) and beef (+15%) still elevated annually.
• Energy prices declined 1.5% for the month, while airfares jumped 6.5%.

The cost of living declined 0.3% in January, driven by lower gasoline and energy prices, according to the latest Consumer Price Index from the U.S. Bureau of Labor Statistics.¹ The drop brought annual inflation down to 2.4%, its lowest level since May 2025.

The annual core CPI, which excludes more volatile food and energy costs, ticked 0.1% lower to stand at 2.5% for January, the lowest level since April 2021.²

The data was better than what many economists had predicted and will factor into the Federal Reserve's upcoming decisions on interest rates. While consumers are still seeing rising prices on many essentials, the pace moderated in the latest monthly CPI data.³

Eggs Drop; Beef and Coffee Costs Still Brewing

Despite improvement, higher grocery prices still stand out in everyday life. Food at home prices increased 0.2% in January and five of the six major grocery categories saw monthly gains from December.⁴

Food staples that also had big monthly gains were:⁵

• Canned vegetables (+5.5%)
• Condiments (+5.3%)
• Bacon and related products (+4.3%)
• Canned fruits (+4.2%)
• Fresh fish and seafood (+3.6%)

On a yearly basis, coffee (+18.3%) and beef (+15%) costs remain major pain points for shoppers, despite easing slightly in the past month. Eggs prices have been trending much more favorably for shoppers since peaking in early 2025. Prices are down 34% year over year, including a 7% decline in January.⁶

Other major foods that saw big monthly price drops in January include:⁷

• Pork chops (-4.1%)
• Lettuce (-2.8%)
• Tea and other beverages (-2.8%)
• Oranges and tangerines (-2.6%)
• Peanut butter (-2.2%)

Food away from home, or restaurants, rose very slightly in January at 0.1% and remains 4% higher on an annual basis.⁸

Read more: Tracking America’s food spending: People spend $1,546 a month on groceries and restaurants

Energy, used cars dip; airfares rise 

Lower energy costs helped offset higher costs in other areas. The overall energy index decreased 1.5% in January, with fuel oil prices dropping 3.3% and gasoline prices falling 3.2%. For the year, gasoline prices are down 7.5%.⁹

The national average for a gallon of unleaded gasoline was $2.94 heading into the President’s Day holiday weekend, according to the latest data from AAA. Prices averaged $3.14 a gallon one year ago.¹⁰ 

But gasoline doesn’t tell the whole story. Travelers looking to escape colder winter temperatures might have noticed a 6.5% jump in airfares from December to January. Car and truck rental prices also rose 5% for the month, while parking fees jumped 7.4%.¹¹

For those looking to own a car, the prices of used vehicles and trucks fell 2% for the month, while new-vehicle prices increased 0.4% from December. Motor vehicle repairs costs rose 0.2% and are up 5.7% year over year, continuing an upward trend that began in 2021.¹²

Read more: The real math behind buying a new or used car

At home: Utilities, household goods

Household costs delivered a mixed picture in January. Electricity prices dipped 0.1% for the month, offering slight relief, but remain 6.3% higher than a year ago — a reminder that utility bills are still elevated.¹³

The household furnishings and operations index rose 0.3%, driven largely by a 3.2% jump in floor coverings. Living room, kitchen, and dining room furniture prices increased 1% in January and are up 4% year over year, although the U.S. recently moved to suspend additional tariffs on those goods.¹⁴

Appliances also became pricier, climbing 1.3% for the month. Electronics saw notable monthly gains too, with video and audio equipment — including televisions — rising 2.2%.¹⁵

Digital essentials continue to add to monthly budgets. Recorded music and subscription services jumped 3.2% in January and are up 7.8% annually. Internet service rose 1.8% for the month and remains 3.5% higher than a year ago.¹⁶

Read more: U.S. delays higher tariffs on furniture and kitchen cabinets