{"id":6558,"date":"2026-01-13T14:56:22","date_gmt":"2026-01-13T14:56:22","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/?p=6558"},"modified":"2026-04-02T23:44:33","modified_gmt":"2026-04-02T23:44:33","slug":"u-s-inflation-stills-stuck-above-comfort-level","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/us-analysis\/us-data-flashes\/u-s-inflation-stills-stuck-above-comfort-level\/","title":{"rendered":"U.S. inflation stills stuck above comfort level"},"content":{"rendered":"\n
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U.S. Consumer Prices grew at 2.7% year-over-year in December, making it 58 months with U.S. inflation above the Federal Reserve\u2019s 2% target. While the headline met expectations by the market, this data print re-enforces several important U.S. economic narratives in play regarding affordability, tariffs, and consumer perceptions of inflation.<\/p>\n<\/div><\/div>\n<\/div>\n<\/div>\n\n\n\n

Importantly, with (permanently) missing October CPI data, and later-than-usually collected November price data, we still don\u2019t have a precise and clean read of inflationary dynamics in the fourth quarter of 2025. What we do feel comfortable saying is that services inflation is still above pre-pandemic levels in part because of a tight labor market, and that tariff passthrough to goods inflation is likely to peak in the second quarter of 2026. That is, tariff passthrough isn\u2019t complete just yet. As such, we continue to believe that core inflation in the U.S. will remain in the 2.5-3.0% year-over-year range for most of 2026, above comfort level though not accelerating.<\/p>\n\n\n\n

The good news is that despite stickiness in prices above \u201ctarget\u201d, inflation is on balance moderate enough to keep consumer spending resilient in the United States, particularly, for the upper end consumer. Real earnings have been positive for over two years, floating around 1% year-over-year. That\u2019s not stellar or a booming economy, but it\u2019s also not a deterioration.<\/p>\n\n\n\n

Zooming out big picture, we may be seeing some decoupling between stronger economic activity and relatively contained inflation. It\u2019s early days for proclamations, but if we have accelerating growth without a matching inflation profile, productivity is perhaps more in play than have been able to see so far.<\/p>\n\n\n\n

Within December\u2019s CPI print, three key categories are worth emphasizing.<\/p>\n\n\n\n