"The inflation trajectory will only steepen in the coming months. We now see a steep rise in inflation and weaker economic activity in Q2 due to the spike in gasoline and energy prices, weaker exports as the rest of the world reels from the disruptions, and an erosion in business confidence."
"The core Personal Consumption Expenditures Price Index, which excludes food and energy costs, rose 3.1% in January compared with a year ago. It has marched higher since reaching 2.7% in October. Core PCE rose at a 3.7% annualized pace over the last three months, close to double the 2% inflation rate targeted by the Fed."
Fourth-quarter 2025 GDP growth was significantly revised downward to 0.7% annualized, half the initially reported 1.4% rate. Real final sales to private domestic purchasers, measuring consumer spending and private investment, rose 1.9% annually, down 0.5 percentage points. The core Personal Consumption Expenditures Price Index, excluding food and energy, reached 3.1% year-over-year in January, up from 2.7% in October. Over the last three months, core PCE rose 3.7% annualized, nearly double the Federal Reserve's 2% target. Consumer spending remained weak, with real personal consumer expenditures rising only 0.1% in January, while the saving rate increased to 4.5%, indicating consumers are prioritizing savings over spending amid economic uncertainty.
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