Grocery prices saw their biggest one-month increase in three years in December but price drops in other categories, including gasoline, helped offset the jump in food costs as U.S. inflation held steady in the final month of 2025.
Tuesday’s Consumer Price Index report from the Labor Department found the average prices of U.S. goods and services increased by 0.3% on a monthly basis in December and are up 2.7% from the same time a year ago, matching November’s annual rate. The core inflation rate, which strips out volatile food and energy prices, clocked in at 2.6% in December, down 0.1% from November’s core reading.
Housing-related costs, which account for over one-third of the CPI inflation calculation, moved up 0.4% from November to December and were 3.2% higher on an annual basis last month. Grocery prices increased 0.7% in December, the biggest one month increase since October 2022 and were 2.4% higher over the last 12 months. Prices for restaurant dining are up 4.1% from the same time last year.
While overall energy prices moved up 0.3% for the month and are 2.3% higher on an annual basis, gasoline inched down again last month and prices at the pump, on average, were 3.5% lower than in December 2024.
Regional inflation for Mountain West states, which include Utah, came in at an annual rate of 2.4% in December, according to the Labor Department report.
Trump administration opens Fed investigation
The latest federal inflation reading comes amid tumultuous political maneuvering over the Federal Reserve and its direction on monetary policy since President Donald Trump began his second term in office nearly a year ago.
On Sunday, Federal Reserve Chairman Jerome Powell acknowledged that the Department of Justice issued subpoenas related to his testimony before the Senate Banking Committee last year regarding renovation of the Fed’s Washington, D.C. offices.
While Trump appointed Powell to the Fed leadership position during his first term, the president has been highly critical of the monetary body and Powell since returning to office. He has called for Powell to resign and made threats to remove him from his chairmanship. Trump’s foremost criticism of the Fed is that it hasn’t made more substantial reductions to its benchmark overnight lending rate.
Powell, a Republican and former private equity executive, joined the Federal Reserve in 2012, ascended to the chairmanship in 2018 via Trump’s appointment and had his term renewed by President Joe Biden in 2022. Powell has a notable record of remaining circumspect in the face of haranguing by Trump and members of his administration but that came to an end over the weekend when the Fed chair posted a video response to news of the DOJ investigation.
“I have deep respect for the rule of law and for accountability in our democracy. No one — certainly not the chair of the Federal Reserve — is above the law,” Powell said. “But this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.”
Trump, who claims he had no knowledge of the DOJ’s investigation, took to social media Tuesday morning to berate Powell for failing to lower interest rates.
“JUST OUT: Great (LOW!) Inflation numbers for the USA,” Trump wrote in a Truth Social post. “That means that Jerome “Too Late” Powell should cut interest rates, MEANINGFULLY!!! If he doesn’t he will just continue to be, “TOO LATE!” ALSO OUT, GREAT GROWTH NUMBERS. Thank you MISTER TARIFF! President DJT”
Why the Fed’s independence matters
Although Trump has previously claimed he had the authority to remove Powell from office, experts generally agree that the U.S. president does not have the power to order personnel changes at the agency without cause. The courts have previously ruled that a difference of opinion on policy matters does not rise to that level.
Congress established maximum employment and stable prices as the key macroeconomic objectives for the Federal Reserve in its conduct of monetary policy. Federal lawmakers also structured the Fed to ensure that its monetary policy decisions focus on achieving that two-part mission outside the impacts of political pressures. To that end, members of the Fed’s Board of Governors are appointed to staggered 14-year terms, and the board chair is appointed to a four-year term. Also, elected officials and members of the president’s administration are not allowed to serve on the board.
A number of Republicans, former Federal Reserve officials and others have warned that the Trump administration actions targeting Powell and the Fed are unwarranted, threaten the congressionally stipulated independence of the central bank and could lead to economic turmoil.
In his video message, Powell argued that the subpoena is not about his testimony last June or the renovation of the buildings in Washington, D.C. but rather a consequence of the Federal Reserve setting interest rates “based on our best assessment of what will serve the public rather than following the preferences of the President.”
The Fed’s policy-setting Open Market Committee approved three straight interest rate cuts at the central bank’s final three meetings of 2025, aiming to address a weakening U.S. labor market. The U.S. central bank is set to have its first meeting of 2026 later this month and most economists are predicting the Fed will stand pat on its current rate range of 3.5% to 3.75%.