Inflation dropped in January. Here’s a look behind the numbers

Inflation fell to 2.4% in January from 2.7% in December, reaching nearly a five-year low.

What’s Happening: Gas prices fell 3.2% last month while apartment rental price growth slowed. Grocery prices increased 0.2% in January and are up 2.1% from a year ago.

What’s Important: Consumer prices remain about 25% higher than they were five years ago. If inflation gets closer to 2%, it could allow rate cuts. High borrowing costs continue to affect major purchases like mortgages and auto loans.

By the Numbers: Consumer prices rose 0.2% in January from December while core prices rose 0.3% monthly. Used car prices fell 1.8% in January from December. Core prices rose 2.5% in January from a year earlier, down from 2.6% the previous month. That marks the smallest increase since March 2021.

What Happens Next: Most economists forecast inflation will decline further by the second half of the year and drop closer to the 2% target by the end of 2026. Economists expect businesses may raise prices in coming months to offset tariff costs.