What Happened
Recent reports indicate a significant shift in the U.S. economic landscape. The U.S. Supreme Court ruled that tariffs imposed by the Trump Administration under the International Emergency Economic Powers Act (IEEPA) are unlawful. This ruling comes alongside a report showing a sharp slowdown in economic growth for the fourth quarter of 2025, with GDP growth moderating to 1.4% annualized, down from earlier expectations of 2.8%. Additionally, inflation data for December revealed that core inflation rose to 3%, up from 2.8% in November.
Why It Matters
The Supreme Court’s decision on tariffs introduces uncertainty into the global trade regime, which could have far-reaching implications for international economic relations. Meanwhile, the inflation rate, which remains above the Federal Reserve’s target of 2%, raises concerns among policymakers. Austan Goolsbee, President of the Federal Reserve Bank of Chicago, emphasized the need for caution regarding interest rate cuts until there is clear evidence of declining inflation. The recent inflation figures, particularly the unexpected rise in the December Private Consumption Deflator to 2.9%, suggest persistent inflationary pressures that could hinder economic recovery.
What’s Next
Given the current economic indicators, it appears unlikely that the Federal Reserve will implement interest rate cuts in the immediate future. The Fed is expected to monitor inflation closely before making any decisions, with potential rate adjustments not anticipated until mid-2026. Investors and market analysts will be watching closely for further developments in inflation and economic growth as these factors will significantly influence monetary policy moving forward.
