The U.S. economic landscape is currently dominated by the combination of high inflation and sustained high interest rates. According to BlockBeats, several key economic indicators are set to be released this week, including the U.S. December wholesale sales monthly rate, February's Conference Board Consumer Confidence Index, and the Richmond Fed Manufacturing Index on Tuesday. Nvidia's earnings report will follow after the U.S. stock market closes on Wednesday, while initial jobless claims for the week ending February 21 will be announced on Thursday, and the Chicago PMI for February will be released on Friday.
Recent data indicates that while the overall GDP growth rate for the fourth quarter of 2025 fell short of expectations, the core GDP still showed a year-on-year increase of 2.4%, suggesting some economic resilience. Additionally, the December core PCE rose by 0.4% month-on-month and 3% year-on-year, marking the largest increase in nearly a year. The super core PCE also rose to 3.3% year-on-year, reinforcing signals of persistent inflation.
As a result, the interest rate market has largely abandoned expectations of a rate cut in the first half of the year. According to LSEG data, traders are now fully pricing in two 25 basis point rate cuts in 2026, with the first cut delayed until July. Some institutions even warn of the risk of only one rate cut throughout the year.
This week's focus will be on the U.S. January PPI data, with market expectations of a 0.3% month-on-month increase and a year-on-year decrease from 3.0% to 2.8%. If inflation at the production level remains resilient, it will further limit the Federal Reserve's policy shift.
Several Federal Reserve officials have already signaled a hawkish stance. Chicago Fed President Austan Goolsbee stated that if inflation remains at 3% or above, the current interest rate level is "not high." Governor Lael Brainard mentioned that she does not support rate cuts until there is confirmation of a sustained decline in inflation. Meeting minutes also revealed that some officials are open to rate hikes if necessary.
Overall, while U.S. economic growth is slowing, it has not stalled, and inflation remains stubborn. Fiscal and trade policies present uncertainties. In this context, short-term market fluctuations may be driven more by data and policy expectations, with the Federal Reserve's policy focus continuing to revolve around maintaining restrictive interest rates for a longer period.
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