Prices in the United States climbed more slowly than predicted in January, providing Americans with a brief respite after years of high prices, but a top Federal Reserve official warns the fight against inflation is far from over.
The Bureau of Labor Statistics said on February 13 that consumer prices climbed 2.4% in the 12 months through January 2026. That is down from 2.7% in December and came in below what most economists had predicted, around 2.5%. When you strip out food and energy, two categories that tend to swing wildly, prices were up 2.5% from a year ago.
On a monthly basis, overall prices gained 0.2%, while that core measure rose 0.3%. Both figures either matched or came in under forecasts.
Services inflation remains a stubborn problem
The numbers come at a time when the broader economy is holding up. Employers added a healthy number of jobs in January, and the unemployment rate remained near 4.3%, steady, but not indicating any major trouble in the job market. Housing costs remained one of the bigger forces pushing inflation higher, while food prices were up 2.9% over the past year.
In an interview with Yahoo Finance, Chicago Fed President Austan Goolsbee discussed the study on the same day it was released. He added there were some encouraging indicators, notably in goods pricing, which did not appear to be adversely affected by tariffs.
However, he was keen to stress that inflation in services is a whole other issue. “Services inflation is not tamed in the CPI,” Goolsbee stated, describing it as a “danger sign.”
He added that once service costs increase, they tend to stay high, and unlike products, they are not subject to the same trade constraints that tariffs bring. He noted that he will be keenly monitoring future Producer Price Index data on services for further information.
Fed in no rush to cut rates
When it comes to interest rates, Goolsbee did not promise any near-term cuts. He said the Fed needs to see real, sustained improvement in inflation before it moves. “If we could get some more improvement on the inflation side, I think rates can still go down a fair bit more,” he said.
However, he made clear that one encouraging report is not enough. He pointed out that inflation has been running above the Fed’s 2% goal for more than four and a half years, and the central bank needs solid evidence of progress before loosening policy further.
He also said he is not certain how restrictive current rates actually are, and that there may be room to bring them down toward a level that neither speeds up nor slows down the economy too much.
Goolsbee’s moderate attitude mirrors the Fed’s overall perspective. Goolsbee’s first opposing vote since arriving in 2023 came in December 2025, when he and Kansas City Fed President Jeff Schmid both voted against reducing interest rates (along with one other dissenter favoring a larger cut).
Six other officials at the discussion urged against going too quickly. In January 2026, he went even further, saying that external pressure on the Fed’s independence may make inflation more difficult to manage.
The markets mirrored this anxiety. According to CME FedWatch data from mid-February, traders expect a rate hold for the March 18, 2026, meeting (78% to 94%). Few saw a near-term drop, but long-term betting on incremental reductions remained if inflation continued to fall.
As of February 14, 2026: 90.8% chance the Fed holds rates at the March 18, 2026 meeting, with 9.2% odds of a 25 bps cut. Source:
CME FedWatch Tool
January’s report offers some reason for optimism, but not enough for the Fed to change course just yet. Upcoming data on producer prices and employment will go a long way in shaping what happens in the months ahead.
