Core inflation in the United States rose slightly at the start of the year, matching expectations, as a rebound in service sector costs fully offset the stabilization in food prices.

Data released by the U.S. Bureau of Labor Statistics on Friday showed that the core Consumer Price Index (CPI), which excludes volatile food and energy prices, increased by 0.3% compared to December, marking the largest monthly gain since August of last year. At the same time, the year-over-year rise in core CPI reached its lowest level since 2021.

The slight uptick in inflation reflected price increases in categories such as airfare, personal care, recreation, medical care, and communication services. However, prices for used cars and trucks, household goods, and auto insurance declined last month.

Following the report's release, U.S. stock index futures showed volatile movements, while Treasury yields moved lower.

January is typically a month when companies adjust prices, and some economists had anticipated that businesses would pass on more tariff-related costs to consumers last month. Although prices rose in certain categories such as apparel and sporting goods, the report indicates that, overall, businesses have largely absorbed cost pressures for American consumers.

Combined with recent signs of stabilization in the labor market, Federal Reserve officials are likely to want to see further progress on inflation before considering interest rate cuts. Traders currently see roughly even odds of a rate cut at the Fed's June meeting; the central bank had previously implemented three consecutive rate cuts in late 2025.

With the release of the latest data, the Bureau of Labor Statistics also incorporated new seasonal adjustment factors, revising data for the past five years accordingly. The agency also adjusts the relative weights of the various price categories that make up the CPI.