January Inflation Report Released Today Expected to Show Price Cooling
Washington D.C., Friday, 13 February 2026.
Despite a robust labor market adding 130,000 jobs, today’s data is expected to show inflation falling to 2.5 percent, offering hope for a return to pre-pandemic economic norms.
New Data Challenges Tariff Fears
While our previous coverage highlighted concerns that protectionist trade measures could reignite market volatility and inflate consumer costs [4], today’s economic indicators suggest a more nuanced reality. The Bureau of Labor Statistics is scheduled to release the January Consumer Price Index (CPI) report at 8:30 a.m. ET this morning, Friday, February 13, 2026 [1]. Despite the implementation of tariffs in mid-2025, the consensus among economists is that the headline inflation rate will decelerate to 2.5 percent year-over-year, down from the 2.7 percent recorded in December [1][2]. If these forecasts hold accurate, the reading would mark a return to inflation levels last seen in May 2025, offering a potential signal that the economy is absorbing trade policy shifts without a dramatic price spiral [2].
The Federal Reserve’s Dilemma
The anticipated cooling in consumer prices arrives as Federal Reserve officials debate the trajectory of interest rates, currently targeted between 3.5 percent and 3.75 percent [2]. Following three previous rate cuts, the central bank held steady in January due to lingering concerns over elevated prices [1]. Regional Fed Presidents have expressed caution regarding the path forward; Kansas City Fed President Jeffrey Schmid recently warned of the risk that inflation could stabilize near 3 percent rather than the central bank’s 2 percent objective [1]. Similarly, Dallas Fed President Lorie Logan noted she is “not yet fully confident inflation is heading all the way back to 2%,” highlighting the tension policymakers face between stimulating growth and securing price stability [1].
Labor Market Resilience Complicates Rate Path
Complicating the Federal Reserve’s decision-making is the surprising strength of the labor market. Data released earlier this week on February 11 revealed that the U.S. economy added 130,000 nonfarm payrolls in January, a figure that exceeded expectations [2][3]. Consequently, the unemployment rate edged down to 4.3 percent from 4.4 percent the previous month [3]. While the healthcare sector led gains with 82,000 new roles, other sectors showed weakness, with the federal government shedding 34,000 jobs and financial activities declining by 22,000 [3]. This robust employment picture has led some investors to speculate that the Fed may delay further rate cuts, fearing that a solid labor market could sustain demand-driven inflation [2].
Assessing the Tariff Impact
Despite the anxieties surrounding the “liberation day” tariffs enacted by President Trump in May 2025, market analysts are observing a muted impact on the broader inflation gauges so far [2]. Goldman Sachs projects that tariffs will contribute merely 0.07 percentage points to core inflation, primarily exerting upward pressure on specific categories such as clothing, household furnishings, and recreation [2]. Tom Lee, head of research at Fundstrat Global Advisors, suggests that a 2.5 percent inflation reading would represent “normal” conditions, consistent with the 2017-2019 average, implying that the economy is normalizing even with tariff impacts lingering in the data [2].
Consumer Balance Sheets Remain Stretched
While the macroeconomic data points toward a “soft landing,” underlying metrics suggest households face continuing pressure. The New York Fed reported that total household debt climbed to $18.8 trillion in the fourth quarter of 2025, accompanied by a delinquency rate of 4.8 percent [3]. Furthermore, housing affordability remains a challenge; as of February 5, 2026, the 30-year fixed mortgage rate averaged 6.11 percent [3]. If today’s core CPI reading—excluding volatile food and energy costs—comes in hotter than the forecasted 0.3 percent monthly increase, it could signal stickier services inflation, forcing the Federal Reserve to maintain restrictive rates longer than markets currently anticipate [1][2].