US inflation cooled more than expected in January 2026, reaching its slowest annual pace since last spring. According to data released by the Bureau of Labor Statistics on February 13, the Consumer Price Index (CPI) rose 2.4% year-over-year. This figure fell below the 2.7% recorded in December and beat the 2.5% consensus forecast from economists. On a monthly basis, the headline index increased by 0.2%, down from the 0.3% rise seen in the previous month. The slowdown was primarily driven by a significant dip in energy costs. Energy prices fell 1.5% in January alone, with gasoline prices plunging 3.2% for the month and 7.5% over the past year. Core inflation, which excludes volatile food and energy sectors, remained slightly more persistent. The core CPI rose 0.3% in January, matching analyst expectations. On an annual basis, core inflation stood at 2.5%, down from 2.6% in December. This marks the lowest core reading since March 2021, signaling a gradual return toward the Federal Reserve's long-term targets. Sector-specific performance showed a mix of pressures. While shelter costs rose at a more moderate 0.2% monthly pace—down from 0.4% in December—other areas saw sharp increases. Airline fares surged by 6.5%, and personal care services grew by 1.2%. Conversely, used cars and trucks saw a 1.8% decline, providing additional downward pressure on the headline figure. The market response to the data was broadly positive. Equity futures trended higher while the US Dollar weakened against major currencies. Bond yields also retreated as traders adjusted expectations for the Federal Reserve's next move. Current market pricing suggests a 10% probability of a rate cut in March, though the central bank’s recent steady stance at 3.50%-3.75% indicates a cautious approach remains. Financial analysts noted that while the cooling is a welcome sign, potential headwinds remain for 2026. The implementation of new tax cuts and the ongoing pass-through of trade tariffs could impact price stability in the coming quarters. For now, the January report provides a rare bit of relief for consumer wallets and keeps the possibility of future interest rate cuts on the table for mid-year.