Inflation has been slowly creeping up in 2025 but not as much as feared, especially with all the tariffs that have been implemented throughout the year. The most recent inflation data point, or Consumer Price Index (CPI) reading showed an annualized inflation rate of 3.0%. That’s pretty close to the long-term average but it doesn’t tell the whole story. So, let’s take a closer look at the underlying numbers.
First, a big component of the CPI reading, rent, has been much softer than usual, helping to keep overall inflation lower than expected. Some of this could be explained by weak demand, particularly from the younger population aged 20 to 24. This group has an unemployment rate of 9.2%, more than double the overall rate.
Now, let’s dig deeper into the inflation numbers and take an x-ray of the year-over-year changes in some of our basic consumer goods:
These are much higher rates than the overall inflation rate and does not bode well for the people in the lower income side of the U.S. economy. Plus, it’s about to get a whole lot worse when we see how much our health insurance premiums are going to go up due to the legislation passed this past summer. Check this out:
I’m not sure how much the rate cuts by the Federal Reserve are going to help if companies continue to pass on the tariff costs to the consumer. I am still hopeful that many of the tariffs will be removed, or deemed illegal by the Supreme Court, and that Congress will reinstate the health care premium subsidies for the Affordable Care Act for those that qualify.
Please comment or send an email if you have any questions.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
