Overview
- Headline CPI rose 0.2% on the month and 2.4% year over year, while core CPI increased 0.3% on the month and 2.5% annually, the lowest core pace since March 2021.
- Falling energy costs, including a 3.2% monthly and 7.5% yearly drop in gasoline, and a 1.8% monthly decline in used cars helped drive the downside surprise.
- Shelter inflation eased to 3.0% year over year with a 0.2% monthly rise, though economists note October 2025 shutdown-related imputation may be understating recent housing costs.
- Markets rallied on the report as investors brought forward rate-cut bets, with several analysts still expecting no move in March but greater scope for reductions later in 2026.
- Coverage also highlighted uneven pressures from tariffs and services—furniture and appliances firmed and airline fares jumped 6.5% on the month—while India’s newly rebased CPI registered 2.75%, complicating cross-country comparisons.