U.S. Inflation and Interest Rates

The Fed’s preferred inflation gauge, core PCE, rose in January—worsening before Iran‑war driven fuel spikes—and Q4 data show softer underlying demand, with real final sales to private domestic purchasers revised down to a 1.9% annual rate, January real consumer spending up just 0.1% and the personal saving rate climbing to 4.5%, while AI‑related investment failed to lift business spending. At the same time job openings jumped to about 6.95 million in January (a ~396,000 increase), even as hiring stalled—employers cut 92,000 jobs and 2025 saw the weakest non‑recession hiring since 2002—heightening tensions between persistent inflation and political pressure for rapid Fed rate cuts.