While official data suggest that U.S. inflation has eased in recent months, a new study from the New York Federal Reserve presents a more cautious view. Accordin Consumer Price Index, core inflation slowed to 2.5% in January, marking its lowest level in nearly five years. This decline has reassured some market participants that price pressures are fading.
However, not all economists are convinced. They argue that the 43-day government shutdown last fall disrupted the collection of price data. In October, nationwide price data were not fully gathered, and in November data collection resumed late — just as holiday discounts temporarily pushed many prices lower.
Critics suggest this may have led to an understatement of inflation in the final months of the year, making January’s lower reading appear more favorable than it truly is. In other words, the recent cooling in inflation may reflect temporary distortions rather than a sustained downward trend.
Using a proprietary measure that strips out temporary factors, researchers at the New York Fed estimated that inflation stood at 2.83% at the end of 2025 — still well above the Federal Reserve’s 2% target. They also warned that the recent slowdown in inflation could be “largely transitory.”
Economists remain divided about what comes next. Some expect inflation to continue trending lower, while others believe price pressures could resurface in the first half of 2026. For now, the outlook remains uncertain and will depend on clearer data in the months ahead.
