US Inflation Rate YoY Holds Steady at 2.70% in December 2025
Key Takeaways: December 2025’s US Inflation Rate YoY remained unchanged at 2.70%, matching both market expectations and November’s reading. This steady pace follows a period of moderate fluctuations, with inflation hovering near the Federal Reserve’s 2% target but still reflecting underlying price pressures. Core macro indicators and monetary policy signals suggest a cautious stance ahead, as external risks and fiscal dynamics continue to shape the inflation outlook.
Table of Contents
The US Inflation Rate YoY for December 2025 was reported at 2.70%, unchanged from November’s 2.70% and in line with the Sigmanomics database consensus estimate. This stability follows a recent pattern of moderate inflation after a peak of 3.00% in October 2025. Over the past year, inflation has averaged approximately 2.75%, indicating a gradual easing from the elevated levels seen earlier in 2025.
Drivers this month
- Shelter costs contributed roughly 0.18 percentage points to the inflation rate, reflecting steady housing demand.
- Energy prices remained stable, exerting minimal upward pressure compared to prior months.
- Used car prices saw a slight decline, subtracting about 0.05 percentage points from overall inflation.
Policy pulse
The inflation rate remains modestly above the Federal Reserve’s 2% target, reinforcing the central bank’s cautious approach to monetary policy. The Fed’s recent interest rate hikes appear to have tempered inflation without triggering a sharp slowdown.
Market lens
Immediate reaction: The US dollar index (DXY) strengthened by 0.15% in the first hour post-release, while 2-year Treasury yields edged up 5 basis points, reflecting expectations of continued Fed vigilance.
Examining core macroeconomic indicators alongside inflation reveals a mixed but generally stable environment. The US unemployment rate held steady at 3.80% in December, supporting wage growth but not accelerating it sharply. Consumer spending showed moderate growth of 0.30% MoM in December, consistent with steady demand but not overheating.
Monetary Policy & Financial Conditions
The Federal Reserve’s policy rate currently stands at 5.25%, unchanged since November. Financial conditions remain moderately tight, with credit spreads slightly elevated but equity markets showing resilience. The Fed’s forward guidance signals a data-dependent approach, with inflation readings like December’s reinforcing the need for patience.
Fiscal Policy & Government Budget
Fiscal policy remains broadly neutral. The government budget deficit narrowed slightly in Q4 2025, reducing inflationary fiscal pressures. However, ongoing infrastructure spending and social program expansions could sustain demand in 2026.
What This Chart Tells Us
The inflation trend is currently stabilizing, reversing the two-month decline seen from October to November. This plateau near 2.70% signals that while inflation is not accelerating, underlying price pressures remain persistent, warranting continued monitoring by policymakers and markets alike.
Market lens
Immediate reaction: Following the release, the US Treasury 2-year yield rose modestly, reflecting market expectations for sustained Fed vigilance. The US dollar appreciated slightly, signaling confidence in the Fed’s inflation control measures.
Looking ahead, the inflation outlook balances between several scenarios:
Bullish Scenario (20% probability)
Inflation falls below 2.50% by mid-2026 as supply chain improvements and subdued wage growth reduce price pressures. This could prompt the Fed to pause rate hikes and potentially ease later in the year.
Base Scenario (60% probability)
Inflation remains near 2.50–2.80% through 2026, with steady economic growth and moderate wage increases. The Fed maintains current rates, signaling a cautious but patient stance.
Bearish Scenario (20% probability)
Inflation reaccelerates above 3.00% due to renewed energy price shocks or fiscal stimulus, forcing the Fed to tighten further. This could pressure financial markets and slow growth.
External Shocks & Geopolitical Risks
Geopolitical tensions in Eastern Europe and supply chain disruptions from Asia remain key risks. Any escalation could push energy and commodity prices higher, complicating the inflation outlook.
In summary, December 2025’s inflation rate holding steady at 2.70% reflects a cautiously optimistic macroeconomic environment. The Fed’s measured approach, combined with stable core indicators and manageable fiscal deficits, supports a balanced outlook. However, vigilance is warranted given external uncertainties and structural inflation drivers such as housing costs.
Key Markets Likely to React to Inflation Rate YoY
The US Inflation Rate YoY is a critical barometer for multiple markets. Interest rate-sensitive assets, currency pairs, and inflation-linked securities typically respond swiftly to inflation data. Below are five key tradable symbols with notable correlations to inflation dynamics:
- SPY – The S&P 500 ETF often reacts to inflation shifts via changes in interest rate expectations and corporate earnings outlooks.
- USDEUR – The US dollar to Euro pair is sensitive to Fed policy shifts driven by inflation data.
- USDJPY – This pair reflects risk sentiment and interest rate differentials influenced by US inflation trends.
- BTCUSD – Bitcoin’s price often moves in response to inflation expectations and real yield changes.
- TLT – The long-term Treasury ETF is highly sensitive to inflation and interest rate outlooks.
Inflation vs. SPY Since 2020
Since 2020, the US Inflation Rate YoY and SPY have shown an inverse relationship during periods of rising inflation. For example, inflation spikes in 2021 coincided with volatility and corrections in SPY, as higher inflation raised concerns over Fed tightening. Conversely, periods of inflation stabilization have supported equity market rallies. This dynamic underscores the importance of inflation data for equity investors.
FAQs
- What is the current US Inflation Rate YoY for December 2025?
- The inflation rate for December 2025 is 2.70%, unchanged from November and in line with expectations.
- How does the December 2025 inflation rate compare to previous months?
- It is stable compared to November’s 2.70%, slightly below October’s 3.00%, and near the 12-month average of 2.75%.
- What are the implications of this inflation reading for monetary policy?
- The steady inflation supports a cautious Fed stance, likely maintaining current rates while monitoring data for future adjustments.
Takeaway: The US inflation rate’s steady 2.70% in December 2025 signals a balanced but watchful economic environment, with policy and markets poised for gradual adjustments amid persistent uncertainties.
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.
The December 2025 inflation rate of 2.70% YoY matches November’s figure and is slightly below the 12-month average of 2.75%. This marks a plateau after a peak of 3.00% in October 2025 and a low of 2.30% in May 2025, indicating a stabilization phase.
Month-over-month comparisons show inflation steady from November to December, following a gradual decline from the summer months when inflation hovered near 2.90% to 3.00%. This suggests that price pressures are contained but not fully subdued.