The US economy faced a significant slowdown at the end of 2025, complicating the Federal Reserve's policy path amid persistent price pressures. Recent data showed the Core PCE price index rising 0.4% monthly, pushing annual core inflation to 3.0%, while the personal savings rate hit a four-year low. This combination of cooling growth and stubborn inflation creates a stagflationary backdrop that likely puts planned interest rate cuts on hold. Markets have reacted by scaling back expectations for monetary easing, as the Fed balances a weakening economy against high costs. Consequently, Treasury yields remain elevated while equity markets face renewed pressure from the increasingly uncertain macroeconomic outlook.
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