Fed's Key Inflation Rate Hot; GDP Growth Tumbles (Live Coverage)

The Federal Reserve’s primary inflation rate came in hotter than expected, while fourth-quarter GDP growth saw a bigger-than-forecast slowdown. The S&P 500 opened moderately lower after the data, as markets had one eye on a potential conflict with Iran and another on a possible Supreme Court Trump tariff ruling.

A possible stabilization of the job market and persistently elevated inflation has dimmed the odds of another Fed rate cut until at least June.

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9:17 a.m. ET

Savings Rate Falls As Income Growth Slows

Households saved 3.6% of disposable personal income in December, the lowest in more than four years. Outside of 2022, when consumers spent down some pandemic stimulus payments, the savings rate is the lowest it has been since 2008. That at least partially reflects a slowdown in real income growth.

Real personal income grew at at annualized rate of just 0.9% in the second half of 2025, down from a 2.6% rate in the first half of the year, according to Austin Clemens, senior fellow at the Washington Center for Equitable Growth.

The depressed savings rate casts down on the pace of consumption going forward, though the One Big Beautiful Bill Act tax cuts should help.

9:03 a.m. ET

More Inflation Details

The inflation overshoot wasn’t quite as bad as it looked. Core PCE inflation rose 0.355% on the month, rounding up to 0.4%. However, the 12-month core PCE inflation rate was 2.997%, so that was exactly as it seemed.

Under the hood, a 1.78% jump in portfolio management prices, which tend to move with the S&P 500, partly explains the hot reading.

Core goods prices rose 0.43% on the month and 1.97% from a year ago. Core services prices rose 0.33% on the month and 3.3% from a year ago.

The Fed pays close attention to market-based prices, which excludes things like portfolio management prices. On a 12-month basis, market-based core PCE inflation ticked up to 2.7% from 2.5%.

8:50 a.m. ET

Fed Rate-Cut Odds Slip

After the GDP and PCE inflation data, markets were still pricing in 6% odds of a rate cut by the March 18 Fed meeting and 20% odds of a cut by the April 29 meeting, according to CME Group’s FedWatch tool. Odds of a rate cut by the June 17 meeting slipped to 56% from 58%.

8:47 a.m. ET

More GDP Details

Goods spending was essentially flat in the quarter in real terms, dipping 0.1%. Services spending rose 3.4%, with another strong contribution from health care outlays. Gross private domestic investment rose 3.8%, the best quarter since Q2 of 2024, despite lower residential investment.

8:46 am. ET

Futures Extend Losses Slightly

S&P 500 futures fell 0.3% following the GDP and PCE reports, slightly worse than before 8:30 a.m. ET. The 10-year Treasury yield ticked down one basis point to 4.06%.

8:43 a.m. ET

Government Shutdown Impact

Direct government purchases and investment fell 5.1% in the quarter, including 16.6% at the federal level. That subtracted nine-tenths of a percentage point from GDP growth.

President Donald Trump, in a Truth Social post before the GDP report was released, claimed the shutdown cut “at least two points in GDP.”

8:39 a.m. ET

GDP Slumps

Q4 GDP rose 1.4%, following 4.4% growth in Q3. The government shutdown weighed. Still, the data was worse than it looked. Private sales to final domestic purchasers, closely watched by the Fed, rose 2.4%.

8:37 a.m. ET

Fed Inflation Gauge Overshoots

The core PCE price index rose 0.4% on the month and 3% from a year ago. November’s reading may have been understated due to the government shutdown.

GDP Forecasts

Wall Street economists are forecasting 2.8% GDP growth for Q4, down from 4.4% in Q3. Personal consumption expenditures are expected to rise 2.4%, slowing from 3.5% growth in the prior quarter.

Thursday’s data showing the trade deficit unexpectedly jumped to $70.3 billion in December has moderated expectations for Q4 GDP growth because more of the growth came from foreign production. To look through the impact of volatile trade data, the Fed focuses on final sales to private domestic purchasers.

Fed Inflation Gauge

The Fed pays most attention to the core PCE price index, rather the the core consumer price index. Core PCE inflation will be released with the December personal income and outlays report.

Economists expect the core PCE price index to rise 0.3% on the month and 2.9% from a year ago. The headline index, including food and energy, is seen rising 0.3% in December and 2.8% from a year ago.

Fed Rate-Cut Odds

Ahead of the GDP and PCE inflation data, markets see just 6% odds of a rate cut at the March 18 Fed meeting, according to CME Group’s FedWatch tool. Odds of a Fed rate cut by the April 29 meeting stand at 20%, rising to 58% by the end of the June 17 meeting.

S&P 500

S&P 500 futures are off 0.1% ahead of the economic releases. On Thursday, the S&P 500 lost 0.3%. That ended a three-day rally and left the S&P 500 still below its 50-day moving average.

Be sure to read IBD’s The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.

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