Consumer prices rose 2.7 percent over the past year, according to data released Tuesday by the Bureau of Labor Statistics, or 2.6 percent when excluding volatile food and energy prices. The report indicated that inflation ended the year on a subdued note as the 2025 tariff increases impacted consumer prices.

The latest figures were consistent with November's data, which had been affected by irregularities due to a lapse in data collection during the government shutdown. The pace of inflation was only slightly slower than at the start of 2025, before President Trump's tariffs on durable goods from most countries led to price increases in sectors such as cars and toys.

This Consumer Price Index (CPI) report is the last one scheduled before the Federal Reserve's meeting in two weeks. Following the December employment report, which showed the unemployment rate dropping to 4.4 percent, analysts anticipate that officials will likely maintain stable interest rates. The Fed had previously cut interest rates three times since September.

A decrease in the cost of used cars and trucks significantly contributed to the CPI, falling 1.1 percent over the month and rising only 1.6 percent over the past year. The tariffs, enacted in early 2025, were intended to bolster domestic manufacturing by making imported goods more expensive. Critics, however, argued that these tariffs would ultimately raise costs for American consumers and businesses.

The Federal Reserve's decisions regarding interest rates are closely watched as they can influence borrowing costs for businesses and consumers, impacting economic growth. The central bank's dual mandate is to maintain price stability and maximize employment. The upcoming meeting will provide further insight into the Fed's assessment of the current economic landscape and its plans for monetary policy moving forward.