The US core CPI in December 2025 increased by 2.6% year-on-year and 0.2% month-on-month, both below market expectations, marking the lowest level since 2021. Falling energy prices (gasoline down 3.4% year-on-year) offset sticky pressures from housing costs (up 0.4% month-on-month) and food (up 3.1% year-on-year). After the data was released, the US dollar index fell briefly, and traders increased the probability of a rate cut by the Federal Reserve in April from 38% to 42%. Despite cooling inflation, Federal Reserve officials still emphasized the need for more evidence to confirm the downward trend. The current policy rate is close to a neutral level, with a 97.2% chance of holding rates steady in January. Housing costs account for over one-third of the CPI weight, and the slow pace of its decline remains a key obstacle to the "last mile" of inflation reduction.