A grocery store in the Manhattan borough of New York on Dec. 13, 2025.

Charly Triballeau | Afp | Getty Images

Progress in the fight to throttle back inflation appeared to stall in December amid price pressures from groceries, dining out, utility gas, clothing, and other categories of consumer spending. The consumer price index, a key inflation gauge, rose 2.7% in December from 12 months earlier, the Bureau of Labor Statistics said Tuesday. That was unchanged from the previous month and in line with estimates.

“The bottom line is, I think inflation is still uncomfortably high,” said Mark Zandi, chief economist at Moody’s. “Inflation for staples, necessities, remains elevated.” Zandi’s statement highlights the ongoing concern about the impact of inflation on household budgets, particularly for essential items.

Tariffs and Inflation

The Federal Reserve, the U.S. central bank, targets an annual inflation rate that averages roughly 2% over the long term. Tariffs levied by President Donald Trump have put upward pressure on the inflation rate, Zandi said. Tariffs are a tax on imports, paid by the U.S.-based importer. Economists have expected that businesses would pass along at least some of that tax to consumers via higher prices.

“I think were it not for the tariffs, we would have been back to target already,” Zandi said. “But tariffs have pushed up inflation a little over half a [percentage] point.” This assessment underscores the complex relationship between trade policies and their effects on domestic inflation rates.

Impact on Consumer Spending

Affordability has emerged as a key financial focus for consumers and a talking point for politicians. Inflation for certain household necessities increased in December. For example, food prices for groceries and at restaurants each increased 0.7% on a monthly basis, from November to December, according to the CPI report.

Certain categories like coffee and beef have seen high inflation rates over the past year — about 20% and 16%, respectively — due to supply constraints. Clothing prices were also up about 0.6% on a monthly basis. However, some increases may appear larger than in reality due to data distortions caused by the government shutdown, according to economists.

Economic Outlook and Inflation

Despite the current inflation rates, economists expect inflation to throttle back in the second half of 2026. “Short of any new tariffs coming online, we think the direction of inflation is lower,” said Tom Porcelli, chief economist at Wells Fargo. This prediction suggests a potential easing of price pressures on consumers in the coming year.

Utility piped gas service increased 4.4% on the month, and is up 11% for the year. Electricity prices declined by 0.1% for the month but were up about 7% for the year. On a positive note, housing is likely to act as a counterweight pulling down overall inflation in 2026 and into 2027, Zandi said.

Conclusion and Future Prospects

Ultimately, disinflationary trends largely appear positive under the surface, likely a welcome sign for Federal Reserve policymakers as they navigate whether to ease back on interest rate policy in 2026, economists said. For more detailed information on the December 2025 CPI inflation breakdown, visit Here.

Smart Tip for Readers

To better manage the impact of inflation on your household budget, consider tracking price changes for essential items and adjusting your spending habits accordingly, focusing on areas where you can cut back without significantly affecting your quality of life.