The US Core Inflation Rate MoM for December 2025 registered a 0.20% increase, according to the latest release from the Sigmanomics database on January 13, 2026. This figure compares to the prior month, November 2025, which also saw a 0.20% rise, and falls short of the consensus estimate of 0.30%. Over the past year, monthly core inflation has averaged approximately 0.21%, indicating that December’s reading aligns closely with the broader trend of persistent, moderate inflation.

Drivers this month

• Shelter costs continued to exert upward pressure, contributing roughly 0.12 percentage points.
• Used vehicle prices showed a slight decline, subtracting about 0.03 percentage points.
• Services excluding housing remained steady, supporting the overall core inflation level.

Policy pulse

The Federal Reserve’s inflation target remains at 2% annualized core inflation. December’s 0.20% MoM increase translates to an annualized rate near 2.40%, signaling that inflation remains above target but is not accelerating sharply. This supports a cautious but steady approach to monetary tightening.

Market lens

Following the release, the US dollar index (DXY) showed a mild appreciation of 0.10%, while 2-year Treasury yields edged up by 3 basis points, reflecting a modest recalibration of expectations for Fed policy. Equity markets responded with limited volatility, suggesting investors are digesting the data as consistent with a gradual disinflation scenario.

Core inflation excludes volatile food and energy prices, providing a clearer view of underlying price trends. December’s 0.20% MoM rise is consistent with a moderate inflation environment, contrasting with the 0.40% peak recorded in February 2025 and the 0.10% lows in April and June 2025. The steadiness over recent months suggests inflationary pressures have not abated significantly despite tighter monetary policy.

Historical context

• February 2025: 0.40% (peak monthly core inflation)
• April 2025: 0.10% (mid-year trough)
• August-September 2025: 0.30% (temporary uptick)
• October-November 2025: 0.20% (stabilization phase)

Monetary policy & financial conditions

The Federal Reserve has maintained a series of rate hikes through 2025, aiming to temper inflation without triggering recession. Financial conditions have tightened, with higher short-term rates and reduced liquidity. However, core inflation’s persistence suggests that supply-side constraints and wage pressures remain influential.

Fiscal policy & government budget

Fiscal stimulus has waned since early 2025, with government spending growth slowing. The federal budget deficit narrowed slightly, reducing inflationary fiscal impulses. Yet, infrastructure and social spending plans continue to support demand in select sectors.

What This Chart Tells Us

Market lens

Immediate reaction: The US dollar index (DXY) rose 0.10%, 2-year Treasury yields increased by 3 basis points, and equity indices showed muted responses. This reflects market acceptance of the data as consistent with a gradual Fed tightening path and no immediate shock to inflation expectations.

Looking ahead, three scenarios emerge for US core inflation:

Bullish scenario (20% probability)

• Core inflation falls below 0.10% MoM by mid-2026, driven by easing supply bottlenecks and subdued wage growth.
• Fed pauses rate hikes, financial conditions ease, supporting growth without reigniting inflation.

Base scenario (60% probability)

• Core inflation remains near 0.15–0.25% MoM, reflecting persistent but manageable price pressures.
• Monetary policy continues gradual tightening, balancing inflation control and economic growth.

Bearish scenario (20% probability)

• Core inflation accelerates above 0.30% MoM due to renewed wage pressures or external shocks.
• Fed adopts more aggressive tightening, risking economic slowdown or recession.

External shocks & geopolitical risks

Ongoing geopolitical tensions, particularly in energy markets and supply chains, could disrupt inflation dynamics. A sudden spike in commodity prices or trade disruptions would likely push core inflation higher, complicating policy decisions.

December 2025’s core inflation rate MoM of 0.20% confirms a persistent inflation environment in the US. While the figure is below expectations, it aligns with recent months’ stability and the 12-month average. Monetary policy remains in a delicate balancing act, aiming to tame inflation without derailing growth. Fiscal policy’s reduced stimulus and ongoing geopolitical uncertainties add complexity to the outlook. Financial markets have so far digested the data calmly, reflecting confidence in a gradual disinflation path. However, vigilance is warranted as structural inflation drivers and external risks persist.

Key Markets Likely to React to Core Inflation Rate MoM

The US Core Inflation Rate MoM is a critical gauge for monetary policy and market sentiment. Key markets that historically track this indicator include:

• USDEUR: The US dollar to euro pair often reacts to inflation data, reflecting shifts in Fed policy expectations.
• SPX: The S&P 500 index is sensitive to inflation trends, which influence corporate earnings and valuation multiples.
• USDJPY: This pair reflects risk sentiment and interest rate differentials affected by US inflation.
• BTCUSD: Bitcoin often moves inversely to inflation fears, acting as a speculative hedge.
• TLT: The long-term Treasury ETF tracks bond yields, which respond to inflation expectations.

FAQs

What is the US Core Inflation Rate MoM?

The monthly percentage change in consumer prices excluding food and energy, reflecting underlying inflation trends.

Why is core inflation important for markets?

It guides monetary policy decisions and influences interest rates, impacting equities, bonds, and currencies.

How does the December 2025 reading affect Fed policy?

The 0.20% rise suggests persistent inflation, supporting continued but cautious rate hikes.

Final takeaway: December’s core inflation data signals steady but persistent price pressures, underscoring the Fed’s challenge in balancing inflation control with economic growth.

Updated 1/13/26

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.