December CPI Shows Modest Inflation Easing
Consumer prices in the US rose 0.3% in December from November, matching the prior month's increase. Core prices, excluding food and energy, also rose 0.2%, signaling that cost pressures are slowly easing toward the Federal Reserve's 2% target.[3]
Economists anticipated a potential jump due to resumed data collection after a six-week government shutdown last fall distorted earlier figures. Instead, prices for gas and used cars fell, while manufactured goods remained flat, hinting at fading tariff impacts.[3]
Trump Administration Pushes Populist Economic Measures
President Donald Trump proposed capping credit card interest rates at 10% and suspending tariffs on imports like coffee, pasta, and furniture to combat rising costs. He also suggested banning Wall Street firms from buying homes, responding to voter concerns over the economy.[3][5]
Trump criticized the Fed for not cutting rates more aggressively, arguing it would lower mortgage rates and government borrowing costs. Financial markets reacted, with bank stocks like Citigroup, Visa, and Mastercard declining amid uncertainty over the credit card cap set for January 20.[5]
Fed Chair Powell Responds to Escalating Pressures
Federal Reserve officials face growing tension from the Trump administration, including DOJ subpoenas served to the Fed. Chairman Powell pushed back publicly, defending the central bank's independence.[4][5]
New York Fed President John Williams stated that tariffs have added about 0.5 percentage points to inflation but underlying trends remain favorable, with no broader pressures. He forecasts inflation peaking in early 2026 before declining to 2% by 2027.[3]
The Fed recently cut the federal funds rate by 25 basis points to 3.50%-3.75%, with some members dissenting for a larger cut or pause.[2]
Mixed Jobs and Growth Signals
December jobs data revealed sluggish growth, adding only 50,000 jobs, with downward revisions removing 76,000 from prior months. The unemployment rate improved to 4.4%.[2]
Third-quarter 2025 GDP grew stronger than expected at 4.3% annualized, driven by 3.5% consumer spending and exports, though a government shutdown likely slowed fourth-quarter activity. Fiscal stimulus is expected to boost early 2026 growth.[2]
Key Upcoming Economic Releases
- Wednesday: US Retail Sales and Producer Prices
- Thursday: US Industrial Production
- Friday: Additional industrial data and global inflation finals
These reports will provide fresh insights into consumer demand and manufacturing amid policy debates.[1]
Market Reactions and Investor Sentiment
Wall Street showed unease with the "Sell America" trade resurfacing due to Trump-Fed conflicts. Small caps, energy, and banks rallied on economic heating signals, while foreign inflows into US assets hit records in 2025.[4]
S&P Global's Investment Manager Index for January reflects improving risk appetite among fund managers, tied to looser policy expectations.[1]
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