Inflation Report Sheds Light Post-Holiday Sales and Shutdown Pricing Effects

The final inflation report of 2025 is set to be released on Tuesday morning. Analysts predict that inflation continued to rise through December, indicating an ongoing affordability crisis for consumers. This follows a mid-December report which showed a 0.2% increase in inflation over October and November. Economists now anticipate a 0.3% rise from November to December.

December Inflation Predictions

The annual inflation rate is expected to reach 2.7%, consistent with earlier data. UBS analysts forecast that the December report will reflect the most substantial monthly increase since January 2025. Core inflation, which excludes the volatile food and energy sectors, is projected to rise by 0.44%.

• Overall Inflation Increase (December): 0.3% from November
• Yearly Inflation Rate: 2.7%
• Core Inflation Increase: 0.44%

Impact on Food Prices

Experts note that consumers likely experienced significant hikes in food prices during December. UBS highlighted that prices for items including eggs, ham, and fresh fruits have risen sharply, indicating that food at home costs will see considerable increases.

Government Response to Economic Challenges

The Trump administration is implementing various policy measures to tackle rising consumer prices. These actions are further propelled by the upcoming election year, as some congressional members will encounter primary challenges by March.

• Policy Actions:
  • Demanding oil companies to enhance investments in Venezuelan oil.
  • Ordering $200 billion in mortgage bond purchases to lower residential mortgage rates.
  • Instructing credit card companies to limit interest rates to 10% for one year.

Federal Reserve’s Role

The administration’s focus also extends to interest rates, as President Trump advocates for the Federal Reserve to reduce rates. A recent Justice Department investigation into the Fed raised concerns about its independence ahead of an upcoming rate decision, where it is expected that rates will remain unchanged. Economists from Bank of America observed that the Fed is prioritizing labor market conditions over inflation rates.

Factors Influencing Inflation Trends

Citigroup analysts indicated that the prolonged government shutdown at the end of last year could result in “distortions” in the inflation report. Furthermore, Seema Shah from Principal Asset Management noted that since President Trump imposed tariffs in April 2025, prices for imported goods have risen by 3%, a trend mirrored by domestic goods.

However, analysts from JPMorgan caution that the anticipated rise in December may correct previous biases. They argue that the September-to-November inflation figures were artificially lowered due to the government shutdown and the timing of holiday sales.

This ongoing analysis of inflation signals that economic factors remain a significant challenge for consumers and policymakers alike heading into 2026.