The Federal Reserve’s preferred inflation indicator has come in showing that inflation is still running hotter than expected. This creates a difficult position for the Federal Reserve as it tries to balance interest rate cuts while managing inflation at the same time. Despite previous rate adjustments, inflation has remained stubbornly high.

It remains to be seen whether any monetary policy will be able to curb the recent trend as it stands. This was also accompanied by a 0.4% increase in personal income, which has been the status quo for some time now. Inflation outpacing wage growth has been a major concern on most consumers’ minds. Lastly, GDP has grown by an unexpected amount, showing that the economy still has room for growth for the foreseeable future.

GDP
The U.S. expanded at a subpar 1.4% annual pace in the fourth quarter of 2025, depressed by a long federal shutdown that caused government spending to plunge. Still, the economy grew at a solid 2.2% rate for all of 2025, a fifth straight year of above-average growth, the latest report on U.S. gross domestic product showed. GDP is the official scorecard for the economy.

PCE Index
The Federal Reserve’s preferred inflation gauge showed that prices rose close to 3% in 2025, leaving the central bank with more work to do to get cost-of-living increases back down to prepandemic lows. The personal consumption expenditures index rose 0.4% in December, the government said Friday in a report delayed by federal shutdowns.

Primary Mortgage Market Survey Index

• 15-Year FRM rates saw a decrease of -0.09%, with the current rate at 5.35%
• 30-Year FRM rates saw a decrease of -0.08%, with the current rate at 6.01%

MND Rate Index

• 30-Year FHA rates saw an increase of 0.01%, with current rates at 5.63%
• 30-Year VA rates saw an increase of 0.01%, with current rates at 5.65%

Jobless Claims
Initial Claims were reported to be 206,000 compared to the expected claims of 223,000. The prior week landed at 229,000.

What’s Ahead
Unemployment data is set to be released next week, along with a slew of additional reports. This has become an increasingly important topic in recent weeks.

In an unexpected turn, the Consumer Price Index (CPI) showed that inflation came in cooler than expected for the month of January, falling to a five-year low.

The jobs report showed that unemployment numbers came in worse than expected, perhaps signaling further hesitation from the Federal Reserve, despite inflation data coming in favorably.

This is also in light of retail sales data showing that, when accounting for post-holiday trends, retail activity has hit a significant slump. This suggests that Americans’ buying habits have changed substantially from the prior year, offering further insight that price pressures are still present at current levels. There is still considerable speculation that the Federal Reserve will move forward with an additional rate cut later this year.

Consumer Price Index
Consumer prices rose less than expected in January, and the rate of inflation fell to a five-year low by one measure, offering an encouraging sign to Federal Reserve officials as they weigh whether to cut interest rates again. The consumer-price index increased a modest 0.2% in January, a tick below the Wall Street forecast.

Retail Sales
Retail sales were flat in December, the government said Tuesday in a report delayed by the federal shutdown last fall. The numbers are seasonally adjusted. Fourth-quarter sales more broadly were also on the softer side compared with the prior two quarters. Americans spent more money than they usually do in the spring and summer to avoid price increases tied to higher U.S. tariffs. It appears they scaled back purchases in the second half of the year to compensate.

Primary Mortgage Market Survey Index

• 15-Year FRM rates saw a decrease of -0.06%, with the current rate at 5.44%
• 30-Year FRM rates saw a decrease of -0.02%, with the current rate at 6.09%

MND Rate Index

• 30-Year FHA rates saw a decrease of -0.13%, with current rates at 5.62%
• 30-Year VA rates saw a decrease of -0.13%, with current rates at 5.64%

Jobless Claims
Initial Claims were reported to be 227,000 compared to the expected claims of 225,000. The prior week landed at 232,000.

What’s Ahead
GDP Estimates and PCE Index Inflation Data is set to release next week as the largest data releases.

While Consumer Sentiment has inched up slightly, Consumer Credit tells a different story. Credit usage has continued to rise, suggesting increased financial strain on consumers amid ongoing economic pressures such as inflation. Although another rate cut is still expected, its likelihood remains uncertain under the current administration.

Consumer Sentiment
Consumer sentiment was essentially unchanged, inching up less than one index point from last month and sitting about 20% below January 2025. Sentiment surged for consumers with the largest stock portfolios, while it stagnated and remained at dismal levels for consumers without stock holdings.

Consumer Credit
In 2025, consumer credit increased 2.4 percent, with revolving and nonrevolving credit increasing 3.4 percent and 2.0 percent, respectively. During the fourth quarter, consumer credit increased at a seasonally adjusted annual rate of 3.0 percent, while in December it increased at a seasonally adjusted annual rate of 5.7 percent.

Primary Mortgage Market Survey Index

• 15-Year FRM rates saw an increase of 0.01%, with the current rate at 5.50%
• 30-Year FRM rates saw an increase of 0.01%, with the current rate at 6.11%

MND Rate Index

• 30-Year FHA rates saw a decrease of -0.04%, with current rates at 5.75%
• 30-Year VA rates saw a decrease of -0.04%, with current rates at 5.77%

Jobless Claims
Initial Claims were reported to be 231,000 compared to the expected claims of 212,000. The prior week landed at 209,000.

What’s Ahead
GDP Estimates and PCE Index Inflation Data is set to release next week as the largest data releases.

While many were optimistic about an additional rate cut, the Federal Reserve has decided to maintain current interest rates pending further data. They have previously stated that at least one more rate cut would follow the last one, but their stance now appears to depend on the availability of sufficient supporting data.

Recent Core PPI reports have also been released, and the data conflicted with earlier CPI and non-core PPI reports. The reports showed that inflation for producers along major production pathways has increased more than expected. This is likely to result in a noticeable increase in wholesale prices across the board.

Additionally, despite the policy intentions behind the tariffs, the trade deficit has remained firmly elevated amid recent policy changes. It is unlikely that even more significant tariff adjustments will lead to a narrowing of the trade deficit. Consumer confidence has also declined for another consecutive week, despite the economy continuing to show signs of strength.

Core PPI
The cost of wholesale goods and services rose sharply at the end of last year, underscoring that the battle against inflation is far from over as President Donald Trump names his pick for chair of the Federal Reserve. Producer prices jumped 0.5% in December, an index published by the government showed. The report was delayed by the government shutdown last fall.

Trade Deficit
The trade deficit fell a few months ago to a 16-year low, but it was fool’s gold. The U.S. is still running a trade gap near historically high levels. In November, the deficit almost doubled to $56.8 billion from just $29.2 billion in October.

Consumer Confidence
The stock market keeps hitting record highs, unemployment is low and the economy is growing surprisingly fast, but Americans were in a foul mood as the new year got under way. A long-running survey of consumer confidence fell in January to a 12-year low, dipping below even the worst readings during the pandemic.

Primary Mortgage Market Survey Index

• 15-Year FRM rates saw an increase of 0.05%, with the current rate at 5.49%
• 30-Year FRM rates saw an increase of 0.01%, with the current rate at 6.10%

MND Rate Index

• 30-Year FHA rates saw a decrease of -0.06%, with current rates at 5.79%
• 30-Year VA rates saw a decrease of -0.06%, with current rates at 5.81%

Jobless Claims
Initial Claims were reported to be 209,000 compared to the expected claims of 205,000. The prior week landed at 210,000.

What’s Ahead
Unemployment Data, Consumer Credit, and U.S. Hourly Wages are set to release next week, with an additional Consumer Sentiment report by the Univ. of Michigan.

The Federal Reserve’s preferred inflation indicator — the Personal Consumption Expenditures (PCE) Index — released under delayed conditions, but it was within expectations. Next week will be another Federal Reserve Rate Decision, and it is expected that the Federal Reserve will reduce rates at least one more time. The optimism among the broader market has been showing that multiple sectors that seem unphased by the administrative decisions and current political climate. 

PCE Index
The PCE Index came in at 2.8% in November on an annualized basis. According to data from the Commerce Department, core PCE, which excludes food and energy, also stood at 2.8% on an annual basis. It rose 0.2% over the previous month.

GDP
The economy expanded at a zippy 4.4% annual pace in the third quarter of 2025, an updated estimate showed, to keep the U.S. on track to score the fifth straight year of above-average growth. Gross domestic product, the official scorecard of the economy, was revised up from the original 4.3% reading, the government said Thursday. It was the strongest quarter of growth in two years.

Primary Mortgage Market Survey Index

• 15-Year FRM rates saw an increase of 0.06%, with the current rate at 5.44%
• 30-Year FRM rates saw an increase of 0.03%, with the current rate at 6.09%

MND Rate Index

• 30-Year FHA rates saw an increase of 0.10%, with current rates at 5.85%
• 30-Year VA rates saw an increase of 0.10%, with current rates at 5.87%

Jobless Claims
Initial Claims were reported to be 200,000 compared to the expected claims of 208,000. The prior week landed at 199,000.

What’s Ahead
The FOMC Rate Decision and delayed Core PPI data will be the largest items for the upcoming week.

Inflation reports have shown their cards, and they have come in line with expectations. These newer reports rely on less data from sources overall, which is why the PCE Index remains the Federal Reserve’s preferred inflation indicator—and that distinction is even more relevant now.

Despite inflation coming in as expected, consumers are still feeling the steady pressure of price increases that are not keeping pace with wage growth. This is also consistent with what the PPI has shown, indicating that manufacturers are experiencing persistent inflationary pressure as well, though still in line with expectations. The Federal Reserve is still expected to reduce rates one more time heading into the new year.

Consumer Price Index
Inflation remained steady, with the December 2025 year-over-year CPI at 2.7%, matching November, while core CPI (excluding food/energy) was slightly lower at 2.6%, suggesting easing underlying pressures but with persistent shelter costs as the main driver. Month-over-month, CPI rose 0.3%, driven by food and shelter, though energy saw smaller gains and used cars declined, indicating a mixed but generally stable trend.

Producer Price Index
The cost of wholesale goods and services rose during the government shutdown and showed the persistence of inflation pressures in the guts of the U.S. economy. A combined report on producer prices showed a 0.2% increase in November and a 0.1% rise in October, the government said. The two months were combined into one report due to the recent federal shutdown.

Primary Mortgage Market Survey Index

• 15-Year FRM rates saw a decrease of -0.08%, with the current rate at 5.38%
• 30-Year FRM rates saw a decrease of -0.10%, with the current rate at 6.06%

MND Rate Index

• 30-Year FHA rates saw an increase of 0.06%, with current rates at 5.75%
• 30-Year VA rates saw an increase of 0.07%, with current rates at 5.77%

Jobless Claims
Initial Claims were reported to be 198,000 compared to the expected claims of 215,000. The prior week landed at 207,000.

What’s Ahead
Another FOMC Rate Decision for next week as well as some of the delayed Core PPI inflationary data.