Except for declines in gasoline and used cars, this was not a good report. 
The CPI Rose 0.3 Percent in December
The BLS reports the CPI Rose 0.3 Percent in December, in line with the Bloomberg Econoday consensus.
The BLS reports to a single decimal place. I calculate two decimal places.
CPI Month-Over-Month Percent Details
- All Items: 0.31
- All Items Except food and Energy: 0.24
- Food and Beverage: 0.67
- Food Away from Home: 0.69
- Food at Home: 0.72
- Shelter: 0.40
- Owners’ Equivalent Rent (OER): 0.31
- Rent of Primary Residence: 0.26
- Medical Care Services: 0.40
- Medical Care Commodities: 0.33
- Energy: 0.30
- Gasoline: -0.45
- Used Cars and trucks: -1.1 (Rounded to 1 Place)
- New Vehicles: 0.0 (Rounded to 1 Place)
CPI Year-Over-Year Percent Change
CPI Year-Over-Year Details
- CPI: 2.7 percent
- Core CPI (Less Food and Energy): 2.6 percent
- Food and Beverages: 3.0 percent
- Food at Home: 2.4 percent
- Food Away from Home: 4.1 percent
- Owners’ Equivalent Rent (OER): 3.4 percent
- Rent of Primary Residence: 2.9 percent
- Shelter: 3.2 percent
- Medical Care Services: 3.5 percent
- Medical Care Commodities: 1.5 percent
- Energy Services: 7.7 percent
- Energy Commodities: -3.0 percent
- Gasoline: -3.4 percent
Impact of Shelter
Shelter is typically the primary factor in the CPI barring wild swings in energy because shelter is over 35 percent of the CPI.
Year-over-year shelter is up 3.2 percent.
CPI Month-Over-Month Rent and OER
CPI Indexes
Trump says “Inflation is nonexistent. It’s a hoax.”
But that chart explains in one image why people are angry.
Blaming everything on Biden does not work because Trump promised to fix this.
CPI Weights
Nearly 3/4ths of the CPI consists of inelastic items.
OER, Owners’ Equivalent Rent is the single largest component of the CPI with a current weight of 26.36 percent.
Rent of primary residence has a weight of 7.49 percent.
Key CPI Issues
While everyone rails against BLS data collection methods and procedures (with good cause), that is not the fundamental problem.
Rather, the fundamental problem is the makeup of the CPI and PCE itself.
The CPI consists of items directly paid for by consumers. The PCE (the Fed’s preferred measure of inflation) contains items indirectly paid for by consumers, notable Medicare and corporate health insurance.
They are both flawed because neither includes home owners’ insurance or property taxes.
I expect big jumps in medical care services starting next month when health care premiums jump.
Nonsensical BLS Chart
The BLS says the cost of homeowners insurance index has risen form 151 to 165 since January of 2020.
That’s an increase of 9.3 percent. But all the BLS counts is insurance for contents, not fire, flood, or hurricane damage to the building.
Let’s now discuss food.
BLS Percentage Weights November 2025
- Food at Home: 7.97
- Food Away from Home: 5.68
USDA Actual Spending Weights
- Food at Home: 5.68
- Food Away from Home: 8.01
Note the BLS food weights for home vs away are reversed from where people actually spend their money.
For more details, please consider Where Do You Spend Money on Food? How Screwed Up Are the BLS Weights?
Does the BLS match your budget?
The Key Mistake
Finally, please consider Is Homeowners Insurance Understated in the CPI? Shop Around! This is the key BLS mistake.
Our Insurance went up by $2,000. Then another $2,000. Here’s our story.
But look on the bright side, Trump Says There Is ‘Virtually No Inflation.’
Homeowners’ insurance, and property taxes, and food are three reasons the CPI is garbage.
Better collection mechanisms will not and cannot fix this fundamental problem.
Worse yet, the Fed, Trump, and the overwhelming majority of economists do no even understand the problem.
But hooray! The year-over-year CPI was tame. I made a note.
Economists need to make a note that wages are not keeping up with inflation because the measures are ridiculous.
Looking Ahead
I expect big jumps in medical care services.
There are 24 million people on ACA, and a majority of them are in Republican states.
For Obamacare discussion, please see my December 7, 2025 post How Much Will 4.5 Million Florida Residents Pay for Obamacare in 2026?
Here’s some interesting health care math on Obamacare in Florida.
What About Overall Health Care Costs?
Good question. I addressed that issue on December 8, 2025 in Health Care Inflation Bomb Makes the Fed’s 2 Percent Target Almost Impossible
Let’s discuss 2026 health care premiums and what they mean to the Fed’s preferred measure of inflation.
I project increases in health care will add 1.4 to 1.6 percentage points to headline PCE inflation before food, energy, shelter, or tariffs move prices at all.
And it’s the PCE, not the CPI that will have the Fed’s attention.
Today’s CPI report shows annual inflation (ending in December 2025) at 2.7%. Trump has lowered the rate of inflation compared to 2022 – 2023.
Keeping the inflation rate below 3% will promote sustainable economic growth, and Trump’s 2025 tariff seems to not have an that adverse of an effect.
I also researched that the FY 2025 deficit is not greater than the FY 2024 deficit. FY 2024 was not an exceptional year as far as crisis funding like 2020-2022.
So this will be the first time the deficit has not increased (at least accounting for inflation) since 2020.
At the end FED hasn’t been that wrong with cutting rates rather carefully.
Earlier this year economists were blathering about a horrendous increase in the price of vehicles that was gonna occur because of Tariffs. Whatever happened to that ???
Anyone remember the figures Mish was bandying about ??
Wasn’t it like a forecasted increase of about $10k ???
Commercial bank credit keeps expanding. But there’s been a massive shift in deposit classifications.
Daniel L. Thornton, May 12, 2022:
“However, on March 26, 2020, the Board of Governors reduced the reserve requirement on checkable deposits to zero. This action ended the Fed’s ability to control M1. In February 2021 the Board redefined M1 so that M1 and M2 are very nearly identical. Consequently, it makes little sense to distinguish between them. In any event, the checkable deposit portion of M2 cannot be controlled now because there are no longer reserve requirements on these deposits. Here is the reason the Fed cannot control these deposits.”
Some Thoughts About Inflation and the Feds Ability to Control It.pdf (dlthornton.com)
https://app.hedgeye.com/insights/116358
Déjà Vu at the Federal Reserve – by David Beckworth
At some point in the near future, we are in for a peloton crash, where one cyclist stops, and the majority of the peloton comes crashing down with them.
Just think what will happen when gas prices go back up.
Is it just us or is inflation s world wide problem.
Gas prices will likely go up if oil prices go up. Or if taxes on gasoline go up. Though there is one thing that might help keep gas prices down: weak demand.
The demand for gasoline is still below 2019 levels, even though miles driven is up. This is because of more efficient ICE vehicles, more hybrids, more PHEVs and more EVs on the road. As we substitute an increasing amount of electricity for gasoline, the demand for gasoline will decline further. And it will decrease even faster in the rest of the world, because PHEV and EV adoption is increasing faster than in the US.
However, the supply of gasoline will keep increasing because we are still refining more barrels of oil worldwide every year in order to get all the other products that are still in demand: diesel, jet fuel, asphalt, petrochemicals, etc.
Unfortunately, it is not easy to adjust how much gasoline is produced from a barrel of oil. For every 42 gallon barrel of oil, we get 19-20 gallons of gas. As we refine more oil, we keep getting more gasoline.
So the trend is more gasoline supply, and less gasoline demand going forward. Hence, lower prices. I have mentioned this here several times over the last couple of years.
On the downside, demand for electricity is growing much faster than supply, thanks to more electric vehicles, AI Data Centers, Crypto, and the growing electrification of our economy. So electricity prices will rise faster.
great analysis and simplification of such complicated topic. hat tip to you. thanks.
You’re not taking into account the exchange value of the dollar. If the human race suddenly came to their senses and stopped using the illegal (according to Article 1, Section 10 of the US Constitution) currency of a bankrupt nation, as the world’s reserve currency, oil will go to $10,000 a barrel overnight. Before you laugh, take a look at the price of gold and silver.
Today, Supreme Court has ruled against Trump and his tariffs. 6-3
Maybe this will help, I am sure The Whitehouse has a plan b to add a tax on the middle and lower class.
RBOB –
RBOB Gasoline Feb 26 (RB=F) Stock Price, News, Quote & History – Yahoo Finance
RBOB Gasoline Feb 26 (RB=F) Stock Price, News, Quote & History – Yahoo Finance
But MAGA clown commenters were posting that Trump has been awesome for inflation….I guess it was TWS after all.
We know with absolute certainty two things:
Health insurance cost have exploded and will continue to do soElectricity cost are about to go exponential due to AI datacentershttps://www.wsj.com/business/energy-oil/power-grid-ai-data-centers-1235f296
America’s AI boom is pushing the nation’s largest power-grid operator to the brink of a supply crisis.
Dominion Energy, the utility company serving parts of Virginia, has received requests from data-center developers that would require more than 40 gigawatts of electricity, enough to power at least 10 million homes. Those requests alone amount to roughly twice the capacity than Dominion had across its Virginia network at the end of 2024. By 2039, Dominion expects peak demand on its system to double.
As electricity is used everywhere in every single business and household, it will impact every single person in one way or another. Buckle up.
The FED would be insane to lower rates with this report. Oh by the way. Only a couple more wiggles higher in the stock market and then share prices head lower in a bear market.
I just came back from the market. A loaf of bread? $8. A basket of strawberries? $17.
“If you like your hyper-inflationary depression, you can keep your hyper-inflationary depression.”
And also, do not fail to note that the US Federal minimum wage is $7.25/hour. Slavery was supposedly outlawed by the 13th Amendment.
When minimum wage was $1.25 the 5 quarters were 90% silver.
That would be around $90/hr. today.
a silver ounce today hit 100usd. that would be 125/hr
Go to a different market.
WHere are you shopping? Dubai?
A loaf of bread is like 2 bucks in most of the USA unless you buy the whole grain handmilled artisan bread for 8 bucks.
To compare apples to apples how about a normal grocery store?
Lots of stores price their basic white or wheat bread as a loss leader (at or below cost). That’s the $2 bread you’re referring to.
How about some prices from Safeway, is that normal enough for you?
Safeway white bread 22oz -$4.49
Home Pride wheat bread 20oz – $5.49
Dave’s Killer Bread – 27oz – $8.99
Ground Beef – (dog food quality, 72% lean in a 5lb plastic tube) $7.36/lb
Ground Beef – (90% lean, fit for human consumption) $12.99/lb.
Strawberries – $5.99/lb
That’s still a lot less than the OP.
Those prices are about 40% higher than where I live.
90 % hamburger that is grass fed is 5.00 a lb. The dog food quality (and I don’t buy it) that is 73% is around 3.50.
Strawberries are about 2.00 a lb here, but there’s lots of strawberry farms around here so that’s hardly a fair comparison.
Where are you? Florida? What store? Prove it.
93/7 beef $5.99/lb. Avocados 49 cents each. Cara oranges 90 cents a pound. https://www.aldi.us/weekly-specials/weekly-ads
Safeway is a notorious rip off; I don’t know anyone who shops there anymore. Their prices are not representative.
A one pound basket of strawberries is $2.92 on Amazon (with prime) same day free delivery. They aren’t great strawberries but they are as good as from Safeway. What size basket are you talking about???????????
Strawberries in January? Always expensive.
My basket is still 10-15% lower than it was under Biden, with the biggest reductions in milk and meats, and occasional reduction in eggs.
Fruits out of season were not even available in the market when I was growing up. And of course nowadays out of season products are either greenhouse or imported – both expensive and not the best quality.
But I do not think that food will go down further, it hit the limit, because the underlying costs have hit the limit, corporate giants are using monopolistic methods, on top of that you have “AI pricing” etc.
“CPI Month-Over-Month Rent and OER”
With two months of fake zero readings in October and November, this number is garbage. 0.4% December shelter*12 = 4.8% annualized. December is supposed to be a low reading.
Actually 5.0 percent due to compounding.
Food is 8.3 percent
CPI 3.8 percent
I have a chart that I did not post.
I love inflation so far. It’s been very good to my family. Of course, all my assets are in Gold mining stocks, rental houses and I’m starting to transition my investments to oil stocks, which are dirt cheap at the moment, especially Brazilian oil (PBR).
However, my expenses are going up quickly. WHile my investments are rising faster than my expenses, and for me this is a good thing, this isn’t a good thing for the country. Not many people have the investments I do, and they are suffering. I’ve seen it first hand.
Anyone without access to capital is going to pull back on spending, and that spells doom upon the economy.
At this point, a serious recession is inevitable. I expect a bad one, the consumer is tapped out.
Yep. Even the people in the 200k-500k income level are tapped out. Companies are cracking down on W-2 employees to get more productivity with AI for less. There will not be any significant hiring going forward (many CEOs have already said this).
Even if you have all the investments, it is a difficult thing to manage the market so to speak everyday.
I agree with your assessment on a recession but I think it will be a different type this time. What I’m seeing is the well to do are doing better in some cases and everyone else is sliding. It is a lowercase k right now but the bottom leg of that k is going to turn into an L.
I see the United States economy as trapped in a Bermuda Triangle unless you are in a sector that is booming (e.g. AI related boom).
I think the fact that oil prices have been stable despite threat of another attack on Iran points to a serious worldwide recession.
Oil is a complicated thing. You need to really study the market dynamics, in particular the supply side.
The USA has a supply side problem. WHile fracking has been a net positive so far it will be a net negative going forward. The best spots have all been drilled and fracked wells deplete very quickly. While technology has been reducing that effect there have been serious side effects, effects that are going to eventually (next two years) make it harder to maintain production.
The Permian in particular is in trouble, wells are under tremendous pressure and eventually regulatory bodies are going to have to intervene. That’s not a matter of if, it’s a matter of when. If you research the water pressure in the Permian you will begin to understand the seriousness of the matter.
When the Permian begins to decline, which will happen this year most likely if not already, oil will climb.
Discoveries in Guyana and Venezuela could toss a monkey wrench but I don’t anticipate Venezuela getting its act together.
Buy oil when a recession begins. That’s always when it’s the cheapest. Buy non American assets that are increasing reserves in the ground. PBR stands to benefit the most, which is why I’m taking a position there. The 10 percent dividend is also nice in the meantime to make me feel better about any gyrations.
I agree with your assessment, though I believe the Permian will decline slowly, not quickly. The non-American assets I prefer are the Canadian oil and gas companies, many of which have extremely long life reserves (some are over 70 years), and very low production costs. Canadian Natural, Imperial, Suncor, Cenovus, Whitecap, Tourmaline etc.