Cool Enough to Hope, Not Cool Enough to Cut

January 2026 CPI — My Key Takeaways

January CPI printed cooler at the headline but still firm under the hood. Headline rose 0.2% m/m and 2.4% y/y, down from 2.7% in December. Shelter (+0.2% m/m) was the largest contributor and continues to be the stickiest component.

Core CPI (ex-food & energy) increased 0.3% m/m and 2.5% y/y—services inflation remains sticky. Strength came from airline fares (+6.5% m/m), medical care, personal care, and recreation. Offset by weakness in used cars (-1.8% m/m), household furnishings, and motor vehicle insurance.

Energy fell 1.5% m/m on lower gasoline prices, providing the main relief to headline inflation. Food rose 0.2% m/m, with food away from home still elevated at +4.0% y/y.

Futures now price 61bp of cuts for 2026 versus 58bp before the release. The market’s interpreting this correctly—not hot enough to kill the cut narrative, not cool enough to accelerate it. This keeps the Fed on hold through Q1 at minimum. Powell needs consecutive prints showing services breaking below 3% before he’ll seriously discuss easing. Shelter at 3.0% y/y won’t give him that cover yet.