US Inflation Update Today 2026: The January inflation report certainly brought some relief to investors. The Consumer Price Index (CPI) recorded a 2.4% decline, the lowest level since last May and below most economists’ expectations. This decline followed a decline in bond yields, raising market expectations of future interest rate cuts. However, some alternative data used by professional investors indicates that inflation could fall even further in the coming six months—and this is due not to government policies but to the way inflation is measured. This is why ordinary people have difficulty understanding grocery bills, while investors are busy planning future strategies.
What drove the real decline in the report?
The biggest driver of the decline in inflation in January was a drop in energy prices. Gasoline prices fell by 3.2% over the month, bringing overall inflation down. Core inflation—which excludes food and energy—was 0.3% monthly and 2.5% annually, the lowest since March 2021. Housing (shelter) spending, which accounts for approximately 35% of the total CPI, increased by only 0.2%. This figure appears normal, but it holds the most important key to understanding the direction of inflation.
Housing Data Delays: Government Data Lags Behind Real Situation
The U.S. Bureau of Labor Statistics (BLS) measures housing costs in two ways—rent and Owner’s Equivalent Rent. According to the National Bureau of Economic Research, this method inherently has a lag because most rents are based on 12-month contracts. Actual market prices are not reflected in the CPI until a new contract is signed. According to real-time data platform Zillow, rents have already declined, but this decline may take several quarters to be reflected in government data.
What is the real-time data telling us?
Truflation, a data provider used by institutional investors, releases daily inflation estimates. As of February 21st, its figure was only 0.97%—significantly lower than the government’s 2.4%. According to the company, consumers are no longer willing to accept rising prices, reducing companies’ power to raise prices. This change is not immediately visible in traditional surveys, but is clearly visible in actual transaction data.
Why could inflation decline further?
Three additional reasons are emerging for the decline in inflation. First, prices of used vehicles are falling as supply chains normalize. Second, employment growth is slowing, which is also reducing wage growth and reducing price pressure in the service sector. Third, the mathematical “base effect”—high figures from last year will be replaced by lower figures, making annual inflation appear lower.
Risks also exist.
However, this decline is not certain. Trade tariffs and labor shortages could push inflation higher again, as the Peterson Institute for International Economics has warned. Meanwhile, the Federal Reserve, led by Jerome Powell, kept interest rates steady at 3.5%–3.75% in January, but a rate cut is possible by mid-2026 if inflation continues to decline.
What does this mean for ordinary consumers and investors?
The good news for ordinary consumers is that price increases are slowing, although prices are not yet falling. Some items, such as used cars and electronics, are becoming cheaper, but healthcare and utilities remain expensive. This signals to investors that if housing inflation truly begins to decline, interest rate cuts could accelerate and change the market’s direction.
Conclusion:
Both official data and real-time indicators point to a decline in inflation. The real question is not whether inflation will decline—but when government data will reflect this reality.
FAQs
What was January’s CPI inflation rate?
January CPI inflation was 2.4%, the lowest level since last May.
What caused the drop in inflation?
Falling energy prices, especially gasoline, were the main reason.
What is core inflation?
Core inflation excludes food and energy to show underlying price trends.
