MW Has inflation really slowed? Not according to this new Fed study.

By Jeffry Bartash

New York Fed said inflation ran close to 3% at the end of 2025

Cattle farmers say beef prices are high because their own costs are higher. Inflation is still a problem in big parts of the U.S. economy.

An apparent slowdown in inflation since last fall has eased worries on Wall Street, but skeptics are yet to be convinced price pressures have largely evaporated. A new Federal Reserve study might add to the doubts.

The consumer-price index showed the annual rate of inflation decelerating to a nearly five-year low of 2.5% in January from 2.6% at the end of 2025, using the so-called core rate that omits food and energy. The core rate is considered by the Fed to be a better predictor of future inflation.

What troubles the skeptics are the lasting effects of the record 43-day government shutdown last fall. Government economists were unable to collect nationwide data on price changes in October, and they also got off to a late start in November.

By the time they started collecting prices in November, holiday discounts were in full bloom. Many prices were temporarily lower than usual.

As a result, the Bureau of Labor Statistics might have underestimated inflation in October and November, critics say. And that partly accounts for the lower inflation reading in January.

A new study by the New York Federal Reserve doesn't directly weigh in on the hawk-versus-dove debate. But researchers at the bank use a proprietary price measure to try to pinpoint the underlying rate of inflation by stripping out any temporary factors, including the effects of the shutdown and limited data collection.

What did New York Fed researchers Martin Almuzara and Geert Mesters find? The rate of inflation in the U.S. stood frozen at 2.83% at the end of 2025 - still well above the Fed's 2% target.

What's more, the recent slowdown as suggested by gauges such as the CPI could be "largely transitory," they said.

Is it conclusive? No. The federal shutdown threw the government's economic reports out of whack. Economists say it could take a few more months for the data fog to dissipate.

Wall Street DJIA SPX economists are divided on what happens next. Many see inflation continuing to trend lower, but others predict price pressures will rear up again in the first half of 2026.

-Jeffry Bartash

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February 17, 2026 14:08 ET (19:08 GMT)

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