Breaking: US CPI rose 2.7% YoY in December
The United States had an annual inflation rate of 2.7% in December, as tracked by the Consumer Price Index (CPI), matching November’s increase, the US Bureau of Labor Statistics (BLS) reported on Tuesday. These figures matched the market forecast.
The core Consumer Price Index, excluding fluctuating food and energy costs, increased by 2.6% in the same month, down from November’s 2.7% rise.
Monthly, the CPI and core CPI rose by 0.3% and 0.2%, respectively.
Follow our live coverage of the US inflation data and the market reaction.
From the statement: "The index for shelter rose 0.4 percent in December and was the largest factor in the all items monthly increase. The food index increased 0.7 percent over the month as did the food at home index and the food away from home index. The index for energy rose 0.3 percent in December."
Market reaction to US CPI inflation data
The selling momentum in the US Dollar (USD) now gathers traction, prompting the US Dollar Index (DXY) to breach below the key 99.00 barrier amid declining US yields across the curve.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.02% | -0.13% | 0.32% | -0.06% | -0.06% | -0.13% | 0.06% | |
| EUR | 0.02% | -0.10% | 0.39% | -0.04% | -0.05% | -0.12% | 0.08% | |
| GBP | 0.13% | 0.10% | 0.45% | 0.06% | 0.06% | -0.01% | 0.18% | |
| JPY | -0.32% | -0.39% | -0.45% | -0.43% | -0.43% | -0.51% | -0.31% | |
| CAD | 0.06% | 0.04% | -0.06% | 0.43% | 0.00% | -0.07% | 0.12% | |
| AUD | 0.06% | 0.05% | -0.06% | 0.43% | -0.00% | -0.07% | 0.13% | |
| NZD | 0.13% | 0.12% | 0.01% | 0.51% | 0.07% | 0.07% | 0.19% | |
| CHF | -0.06% | -0.08% | -0.18% | 0.31% | -0.12% | -0.13% | -0.19% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
This section below was published as a preview of the US Consumer Price Index (CPI) data at 05:00 GMT.
- The US Consumer Price Index is seen rising 2.7% YoY in December.
- Core CPI inflation should remain sticky well above the Fed’s goal.
- Investors have so far pencilled in 50 bps of easing this year.
The US Bureau of Labor Statistics (BLS) will publish December’s Consumer Price Index (CPI) report on Tuesday at 13:30 GMT. The report is expected to show that prices remained broadly stable in the last month of 2025. As always, it’s a key read on inflation and could stir some short-term moves in the US Dollar (USD).
That said, it’s unlikely to shift the bigger picture for the Federal Reserve (Fed) just yet. With policymakers still focused primarily on the health of the domestic labour market, the data would probably need to deliver a real surprise to trigger any rethink on monetary policy.
What to expect in the next CPI data report?
Inflation itself isn’t expected to spring many surprises. Headline CPI is seen rising 2.7% YoY in December, unchanged from the previous month. Strip out the more volatile food and energy components, and the picture is much the same: core inflation is forecast to edge up slightly to 2.7% from 2.6%, still uncomfortably above the Fed’s target.
On a monthly basis, both headline and core CPI are expected to come in at a fairly steady 0.3%, reinforcing the idea of inflation that’s easing only slowly rather than rolling over.
That also helps explain why December’s rate cut was never a slam dunk. The Minutes released on December 30 show a deeply split Committee, with several officials saying the call was finely balanced and that leaving rates unchanged was a very real alternative.
Previewing the report, analysts at TD Securities noted, “Following the impact from the government shutdown, we now anticipate the core segment to peak at 3% in Q2. We remain of the view that gradual disinflation will be the story in H2 2026. We expect core CPI inflation to end the year at 2.6%.”
How could the US Consumer Price Index report affect EUR/USD?
Investors are still chewing over a mixed set of signals from December’s Nonfarm Payrolls (NFP), but that debate is starting to take a back seat. Fresh threats to the Fed’s independence have resurfaced, and they risk overshadowing the significance of Tuesday’s inflation data altogether.
Given that the Fed is still keeping a close eye on the labour market, December’s CPI numbers are unlikely to change the policy picture in any meaningful way, unless inflation throws up a genuine surprise, one way or the other.
Turning to EUR/USD, Pablo Piovano, Senior Analyst at FXStreet, shared his technical outlook. “If EUR/USD decisively slips below the short-term 55-day moving average at 1.1639, it would open the door to a deeper pullback, with the 200-day SMA at 1.1561 coming into focus sooner rather than later,” he notes. “Below that, attention would turn to the November low at 1.1468 (November 5), followed by the August trough at 1.1391 (August 1).”
“On the flip side, a clean break above the December peak at 1.1807 (December 24) would shift the tone back to the upside. That would put the 2025 high at 1.1918 (September 17) on the radar, with the psychologically important 1.2000 level lurking just beyond,” Piovano adds.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.