The January CPI report is the best inflation news we’ve had in months. Here’s why.

The January inflation reading offered encouraging signs for consumers and the economy, with the Consumer Price Index coming in below Wall Street expectations and falling to its lowest level in nine months.

Inflation averaged a 2.6% annualized rate from November through January, compared with nearly 2.9% from July through September. (October’s CPI report was canceled due to the government shutdown.) Cooling inflation could provide some financial relief for budget-strapped consumers, experts said.

«Inflation fell to the lowest level since May, and key items such as food, gas and rent are cooling off,» Heather Long, chief economist at Navy Federal Credit Union, said in an email. «This will provide much-needed relief for middle-class and moderate-income families.»

Here are five takeaways from today’s CPI report, which tracks changes in prices of goods and services across the U.S.

Inflation came in cooler than expected 

Friday’s report showed that January’s inflation rate dipped to 2.4% on an annualized basis, below economists’ forecasts of 2.5%.

The softer reading came as a surprise to some because the January CPI often comes in hotter than other months due to seasonal factors and more rapid price changes at the start of the year, the Federal Reserve Bank of Boston said in an analysis earlier this month.

To be sure, while inflation is cooling, prices continue their upward trajectory.

«They’re going up at a slower pace, and that’s what we want, but they’re still going up,» Stephen Kates, a financial analyst at Bankrate, told CBS News ahead of the CPI release.

Core inflation, which strips out the more volatile food and energy prices, rose 2.5% year over year, a sign that prices remain somewhat sticky.

Some grocery costs eased

Price hikes at the grocery store are easing, providing some relief for a major financial pain point for many American consumers. Food at home — a category that tracks food bought at grocery stores and other retailers for consumption at home — rose 2.1% from a year earlier, cooler than the overall CPI rate.

Grocery items that dropped in price last month compared with a year earlier include cheese, fresh fruit and eggs, with the latter declining 34%. To be sure, some foods are still experiencing significant price hikes, including ground beef and roasted coffee, with both items jumping 17%.

Prices at restaurants and other eateries rose 4% last month from a year earlier — hotter than the overall inflation rate. 

Lower prices at the pump

One standout from Friday’s report was energy prices, which showed a notable deceleration and helped cool the overall inflation reading, EY-Parthenon senior economist Lydia Boussour said in an email. 

Within the energy category, gasoline prices dipped 7.5%. 

Electricity prices, however, remain sticky, rising 6.3% year over year. That comes amid an increase in electricity demand, which has driven up consumers’ utility bills. 

Price pressures are likely to persist: The U.S. Energy Information Administration forecasts residential electricity prices will rise nearly 4% in 2026.

Housing costs slowed

Housing costs, categorized as «shelter» in the CPI, slowed in January. The category rose 3% from a year earlier, down from 3.2% in the prior month.

One caveat: experts say that the year-over-year shelter figures have been softer in recent months, likely due to the lingering effects of the government shutdown in fall 2025, which disrupted federal data collection. 

«The Bureau of Labor Statistics did not have data from October, and they had to impute what they think it was going to be, and that has very likely created some artificially low numbers on housing,» Kates explained, adding that he expects numbers to normalize around March or April. 

Fed likely to hold off on a March cut

Many experts say the Federal Reserve will hold off on another rate cut at its March meeting, even though today’s CPI report showed inflation inching closer to the central bank’s goal of a 2% annual rate. 

While January’s CPI data will be «welcome news for the Federal Reserve,» there may be concerns about some data distortions remaining from last fall’s government shutdown, noted Bernard Yaros, lead economist at Oxford Economics, in a Friday report. 

The Fed will also likely be monitoring the labor market for signs of stabilization, he added. Oxford is forecasting two rate cuts in 2026, at the Fed’s June and September meetings.