Fresh inflation data offered a rare bit of good news: prices didn’t spike at the start of the year. The Consumer Price Index showed headline inflation rising 0.2% month over month, while core inflation, which strips out food and energy, increased 0.3% both slightly below expectations.
Markets welcomed the relief. The SPDR S&P 500 ETF $SPY ( ▲ 0.07% ) ticked higher following the release, as investors took comfort in the idea that inflation isn’t reaccelerating just as rate-cut hopes hang in the balance.
January is usually a troublemaker
This report carried extra weight because January has historically delivered unpleasant surprises. Companies often roll out price hikes at the start of the year, and in recent high-inflation periods those increases have been large enough to show up even after seasonal adjustments.
From 2022 through 2025, core CPI rose about 0.45% on average each January, significantly hotter than the roughly 0.33% typical monthly increase. Against that backdrop, this year’s cooler reading looks like a meaningful shift.
Fed watchers breathe a little easier
Economists had expected slightly stronger increases, and prediction markets had already leaned toward a benign outcome. Odds currently suggest a high probability that the Federal Reserve will keep interest rates unchanged at its upcoming April meeting.
While one report won’t seal the deal, softer inflation reduces the risk that policymakers will feel compelled to tighten further. For now, the data supports a “wait and see” stance — and after several years of stubborn price pressures, even modest relief counts as a win.