Sticky Inflation Keeps Fed on Hold as GDP Growth Slows to 1.4%

Rising inflation likely keeps the Federal Reserve on hold despite slowing economic growth. The central bank’s preferred inflation gauge rose to 3% year-over-year in December 2025, validating the pause in rate cuts. Real GDP grew by 1.4% in the fourth quarter of 2025, missing consensus estimates of 2.5% due to a government shutdown. Analysts predict the Fed will maintain the benchmark rate between 3.5% and 3.75% until inflation trends downward, with potential cuts expected by late 2026.