Reviewed by Gotrade Internal Analyst
Jakarta, Gotrade News - The latest data from the Bureau of Labor Statistics (BLS) shows that US annual inflation stayed at 2.7 percent in December 2025. While this number hasn't budged from the previous month, it shows decent progress compared to early 2025 when it was hovering around 3 percent.
Key Takeaways:
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US annual inflation held steady at 2.7% in December 2025, while core inflation eased to 2.6%.
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Monetary policy focus is starting to shift from just fighting high prices to keeping the job market stable.
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Markets expect the Fed to keep interest rates on hold this January despite political pressure for a cut.
This report is a big deal because it confirms that price pressures are finally getting "tamed," even if they aren't quite back to the 2 percent target yet. This gives the Federal Reserve some breathing room to start worrying more about the cooling job market.
According to a report from CNBC, core inflation—which strips out volatile food and energy prices—rose 2.6 percent annually. This came in lower than what the market expected and matched a four-year low.
This dip in core inflation is a clear signal to policymakers that the risk of prices "shooting up" again is fading. Sonu Varghese, a macro strategist at Carson Group, noted that this softer data allows the Fed to focus on unemployment risks, which currently sit at 4.4 percent.
Even though the annual rate is chilling out, monthly inflation actually ticked up 0.3 percent in December, driven by high housing and food costs. Shelter costs jumped 0.4 percent, making it the biggest reason for last month's increase.
The energy sector also saw a 0.3 percent rise, while food prices spiked quite a bit at 0.7 percent. On the flip side, prices for used cars and communication services actually dropped, helping to balance out the overall index.
This steady inflation print triggered a strong reaction from President Donald Trump, who is once again "pushing" Jerome Powell to cut interest rates meaningfully. Through social media, Trump argued that current high rates are basically a handbrake for US economic growth.
However, Fed officials seem likely to stay "wait and see" and won't be rushing into any more rate cuts early this year. According to CME Group data, most traders are betting the Fed will keep rates in the 3.5 to 3.75 percent range at the end of this month.
Gregory Daco, an economist at EY-Parthenon, warned that we might see a "burst" in goods prices in Q1 2026 due to tariff impacts. Many companies are likely to start passing on the extra costs they’ve been "eating" for the past few months to consumers.
Stock market sentiment saw a slight "hijau" (green) trend right after the data was released, reflecting investor optimism that inflation isn't heating up again. This is a key signal for risk assets, including tech giants like Apple Inc. and Microsoft Corporation.
Indonesian investors should also keep an eye on this trend through instruments that track the US market, such as the Vanguard Total Stock Market ETF. A stable US economy usually brings more certainty to global policy, which impacts capital flows to emerging markets like ours.
The long-term impact of tariffs and immigration policy will likely be the "deciding factor" for inflation throughout 2026. Eric Teal from Comerica Wealth Management projects that inflation will likely bounce around the 2.2 to 2.7 percent range this year.
The Fed is currently in a "dilemma" between hitting their inflation target and preventing a spike in unemployment. This January decision will set the tone for global financial markets for the first half of 2026.
Reference:
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CFO Dive, Inflation holds steady, affirming Fed focus on weak job market. Diakses pada 14 Januari 2026
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CNN, Inflation remained at 2.7% in December, as high prices continue to weigh on many Americans. Diakses pada 14 Januari 2026
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CNBC, December core consumer prices rose at a 2.6% annual rate, less than expected. Diakses pada 14 Januari 2026
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Featured Image: Shutterstock
