Economic Updates Going into 2026
- bulldogfinancialpl
- Jan 13
- 2 min read
The rate of inflation has gotten slightly higher than earlier in the year, but still under 3%. The smaller increase this year is most likely a result of the tariffs. PCE was last estimated to be 2.8 with food and energy. PCE excluding food and energy is estimated to be 2.9. This rate is close to where inflation was at the beginning of the 2025.
CPI was announced January 13th 2026 and was 2.7% year over year. CPI excluding food and energy was 2.6% year over year. These rates of inflation shows moderate price increases year over year, but we still feel the effects of the high three-year average.
One of the major developments in inflation has been the pace of gas price decreases over the last year. This is a result of lower prices of oil. Prices of oil have dropped to around $60/barrel which should continue to translate into lower gas prices and could help reduce the pace of overall inflation or offset the increases caused by tariffs.
The Fed’s goal for inflation is still 2% which means they are being cautious about making more rate cuts; however, there has been some pressure on the labor market which has justified rate cuts in the last two meetings. This means the Fed rate is to start 2026 is currently 3.5%-3.75%. This should flow through the market gradually and can translate into slightly lower borrowing rates and less interest earned on cash.
In terms of the labor market, although unemployment has grown to 4.4%, this rate remains below the 25 year average which is around 5.8%. The increase was enough for the Fed to cut another two times to end 2025.
In other economic news, the Gross Domestic Product grew by 4.3% which is the highest rate over the last couple of years. You can see this in the charts below. In addition, the trade deficit was reduced to the lowest level since 2009. Both of these show signs that our economy is continuing to be resilient.
Given all of these circumstances, the economy is growing stronger which is good; however, there are still risks of higher inflation and the Fed will continue to balance risks of inflation with the changes in the labor market whenever considering rate cuts throughout 2026.
Sources:
Bureau of Economic Analysis
Gross Domestic Product
Current Release: December 23rd 2025 (accessed January 9th 2025)
The Federal Reserve Board
Minutes of the Federal Open Market Committee
December 9th-10th 2025
MarketWatch
U.S. Economic Calendar
Accessed January 13th 2026
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