This Week's Macro Outlook: U.S. Inflation Resilience Coupled with Tariff Uncertainties May Delay Federal Reserve Rate Cuts Until July

Mars Finance reports that on February 23, the U.S. macroeconomic focus has shifted back to the combination of “prolonged high inflation and sustained high interest rates.” On Tuesday at 23:00, data releases include U.S. December wholesale sales month-over-month, the U.S. February Conference Board Consumer Confidence Index, and the U.S. Richmond Fed Manufacturing Index. After the U.S. stock market closes on Wednesday, Nvidia will release its earnings report. On Thursday at 21:30, weekly initial jobless claims data through February 21 will be published. On Friday at 22:45, the U.S. February Chicago PMI will be released.

Latest data shows that U.S. GDP growth in Q4 2025 was below expectations, but core GDP still grew by 2.4% year-over-year, indicating economic resilience. The December core PCE increased by 0.4% month-over-month and rose to 3% year-over-year, the largest increase in nearly a year, with super-core PCE reaching 3.3% year-over-year, reinforcing signals of sticky inflation. As a result, the interest rate market has largely abandoned expectations of rate cuts in the first half of the year. According to LSEG data, traders are fully pricing in two 25 basis point rate cuts in 2026, but the first cut has been pushed back to July, with some institutions even warning that the risk of only one rate cut for the entire year is increasing.

This week’s focus will be on the U.S. January PPI data. The market expects PPI to increase by 0.3% month-over-month, with the year-over-year rate possibly falling from 3.0% to 2.8%. If producer-side inflation remains resilient, it will further limit the Federal Reserve’s policy adjustment space. Several Fed officials have signaled a hawkish stance. Chicago Fed President Goolsbee stated that if inflation remains at 3% or above, the current interest rate level is “not considered high”; Board member Barr said he does not support rate cuts until inflation continues to decline; and the minutes also show some officials are open to raising rates if necessary.

Overall, while U.S. economic growth has slowed, it has not stalled, and inflation remains stubborn. Fiscal and trade policies are uncertain. In this context, short-term market volatility is likely to be driven more by data and policy expectations, with the Federal Reserve’s policy focus remaining on “maintaining restrictive interest rates for a longer period.”