January CPI preview: Shutdown quirks fade, seasonal issues reemerge

Summary

The January CPI report should offer a cleaner read on inflation, as distortions tied to last fall’s government shutdown continue to fade. The subsequent, brief shutdown at the start of February delayed the January CPI release, but it did not affect data collection. That said, new seasonal adjustment factors will be introduced with this report and leave the past five years of data subject to revision. Although last January’s jump in prices will likely lead the updated factors to “expect” some early‑year strength,we are concerned that the pandemic period is still causing seasonal distortions in the data.

Against that backdrop, we look for core CPI to rise 0.33% month-over-month in January, about 10 bps stronger than its average pace 2025. Delayed pass‑through of tariff costs is likely to underpin firmer core goods prices, while we anticipate a moderate boost to services inflation. Headline CPI is expected to increase a more modest 0.25%, restrained by food and gasoline, even as energy services prices continue to climb. While both headline and core CPI should edge lower on a year‑over‑year basis in January, we do not expect much further cooling over the course of 2026 as easier fiscal and monetary policy lend some support to demand.

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