BEFORE we begin, a quick but important note: this article is for educational purposes only, not personal investment advice. The goal is to explain what the latest inflation data actually means — calmly, clearly, and based on evidence, not predictions.
At Streetwise Economics, the focus is on helping readers understand macroeconomic trends and financial data so they can think independently, rather than react emotionally to headlines.
US inflation ended 2025 at around 2.7% year-over-year, according to the latest Consumer Price Index (CPI) data from the US Bureau of Labour Statistics (BLS).
That is well below the 9,1% peak seen in 2022, when inflation shocked households and markets alike, but it is still above the Federal Reserve’s 2% target .
On the surface, 2,7% may not sound dramatic. In fact, compared with the inflation many countries have experienced over the past decade — including Zimbabwe — it looks relatively mild.
But for the world’s largest economy, and the issuer of the world’s reserve currency, that remaining gap between 2% and 2,7% matters.
The key takeaway is this: inflation has cooled, but it has not yet fully normalised.
For December 2025, US consumer prices rose 2.7% compared with a year earlier, matching the pace seen in November and coming in broadly in line with economists’ expectations.
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On a month-to-month basis, prices increased by about 0.3% in December, a faster pace than November’s roughly 0.1% rise as per the latest BLS report .
Economists and central bankers also pay close attention to core CPI, which strips out food and energy prices because they are volatile. Core inflation rose about 0.2% in December and sat in the 2.6–2.7% range over the year — slightly cooler than some forecasts, but still above the Federal Reserve’s comfort zone .
In plain language:
- Inflation is no longer running out of control.
- But it is also not falling fast enough for the Fed to declare victory.
What is still pushing prices up?
The structure of inflation today looks very different from 2021–2022.
Back then, price pressures were broad and severe, driven by supply-chain breakdowns, pandemic stimulus, and sudden shifts in consumer demand. In 2025, inflation is narrower and more uneven.
The data show that:
- Housing and rent-related costs remain stubbornly high.
- Services inflation — things like healthcare, insurance, and travel — is still rising faster than ideal.
- Meanwhile, many goods prices (such as used cars and some electronics) have flattened or even declined .
Trade policy has also played a role. New or adjusted tariffs announced in 2025 added some upward pressure on prices. However, the impact was smaller than many feared, partly because retailers absorbed some costs instead of passing them fully onto consumers .
At the same time, wage growth has cooled and the labour market has softened slightly, limiting how aggressively companies can raise prices without losing customers .
What this means for US interest rates
The Federal Reserve’s inflation target remains 2%, and with both headline and core inflation still hovering around 2.6–2.7%, policymakers are in no rush to cut interest rates aggressively.
Market pricing and bank research suggest that US policy rates may decline only gradually, with some projections pointing to the federal funds rate settling in the low-3% range during 2026, rather than falling back toward the near-zero levels seen after the global financial crisis or during the pandemic .
Tools like the CME FedWatch and commentary from major banks indicate that investors expect very limited rate cuts, if any, in the near term. The prevailing expectation is that the Fed will “hold the line” — staying cautious while monitoring inflation and labour-market data .
This reflects a real risk: if services inflation stays sticky, or if tariffs and geopolitical tensions add renewed price pressure, inflation could remain closer to 3% than 2% for longer than policymakers would like.
Why this still matters for Zimbabwe
For a Zimbabwean audience, US inflation figures may seem abstract or insignificant compared with local price dynamics. But they matter — a lot.
The US dollar is the world’s primary reserve currency. When US inflation stays above target and US interest rates remain high:
- Global borrowing costs rise.
- Investors become more selective about where they deploy capital.
- The dollar tends to remain firm, making imports more expensive for countries that rely on it .
- For Zimbabwe, this can affect:
- The cost of trade credit and external financing.
- Government and corporate access to dollar funding.
- The broader investment environment for emerging and frontier markets.
At the same time, relatively stable US inflation around 2-3% helps anchor global price expectations and can support demand for commodities — an important consideration for a resource-rich economy like Zimbabwe .
Working with data, not predictions
One of the most important lessons from the past few years is this: even central banks cannot predict the future with precision.
The Federal Reserve’s own forecasts have shifted repeatedly as new data emerged. Major banks revise their outlooks constantly. This is why any serious strategy — whether at the policy level or for individual investors — must be built around data and discipline, not bold predictions .
A data-driven approach means focusing on:
- Trends, not single data points. Is inflation broadly falling, flattening, or re-accelerating?
- Real interest rates, not just headlines. Are rates high relative to inflation, and what does that imply for borrowing and investment?
- Fundamentals, especially cash flows, debt levels, and resilience at the business level, rather than short-term market reactions after each CPI release.
This perspective is central to the philosophy at Streetwise Economics: understanding the economic environment first, then making thoughtful, risk-aware decisions — not reacting emotionally to every headline.
The bigger picture
The latest CPI report closes out 2025 with inflation far below crisis levels but still above target. That combination points to a world of moderate but persistent interest rates, where patience, risk management, and attention to real economic data matter far more than trying to guess the next move by the Federal Reserve.
There is no clear “buy” or “sell” signal in a 2.7% inflation print. What it does signal is a shift away from emergency-level policy and toward a more disciplined, data-dependent environment — one where clarity beats certainty.
For readers trying to make sense of global markets from Zimbabwe or elsewhere, that may be the most important lesson of all.
Isaac Jonas is a Zimbabwean-Canadian economist, trader, and founder of Streetwise Economics — a global platform blending real-world experience with financial education for emerging market investors. Based in Canada, he shares financial education through his YouTube channel and social media. His website: www.streetwiseeconomics.com and his email [email protected]. Disclaimer: Educational content only — not financial advice.
