�鶹��Ʒ��Ƶ

�鶹��Ʒ��ƵEconomists: Delayed Data Leaves Fed Cautious on Rates

Even as updated inflation data shows persistent price pressures, the Federal Reserve faces continued uncertainty over interest rates, according to researchers at �鶹��Ʒ��Ƶ.

---

Even as updated inflation data shows persistent price pressures, the Federal Reserve faces continued uncertainty over interest rates,��according to researchers at �鶹��Ʒ��Ƶ.

The Personal Consumption Expenditures Price Index (PCEPI), which is the Federal Reserve’s preferred measure of inflation, grew at a continuously compounding annualized rate of 4.4% in the last month of 2025. Core PCEPI, which excludes volatile food and energy prices, grew at an annualized rate of 4.3% in December 2025.

“Prices continued to rise, but at a slower pace than in the previous few years,” said  , Ph.D., associate professor of economics in the  . “While inflation has moderated, it still remains above the Federal Reserve’s long-run target of 2%.”

The Fed is tasked with maintaining price stability in the United States and aims for prices to grow at an average of just 2%. Stubbornly high inflation readings over the back half of 2025 led the Federal Open Market Committee to pause its rate cuts last month, with the federal funds rate target range held at 3.5 to 3.75%. FOMC members appear to be divided on whether—and, if so, when—to begin cutting rates again.

“Policy shocks, delayed data, and political pressures mean Fed officials are likely to remain cautious, keeping rates steady for now,” said  , Ph.D., associate professor of economics in FAU’s College of Business. “FOMC members disagree about the proper path for the federal funds rate. Those disagreements stem from competing views on the many policy shocks realized over the last year and how best to deal with political pressure from the president.”

The uncertainty from the Fed on how to set the federal funds rate could have far-reaching consequences for businesses and consumers alike. When there is uncertainty about the path of interest rates, firms may postpone or scale back planned investment and hiring. This can dampen productivity growth and job creation. For consumers, uncertainty can affect decisions about large purchases such as homes, cars and education.

“If the Fed keeps rates elevated longer than necessary, monetary policy could become overly restrictive. More broadly, sustained high interest rates could slow GDP growth and increase the risk of a ‘hard landing’ for the U.S. economy,” Van Tassel said. “On the other hand, the primary risk of cutting interest rates too soon is that this will re-accelerate inflation.”

-FAU-

Tags: business