U.S. GDP grew at 1.4% annualized rate in Q4 2025, missing 2.5% expectation
Core PCE inflation remained at 3% in December, above Fed's 2% target
Both GDP and inflation data complicate Federal Reserve's interest rate decisions
Economic growth is slowing while inflation remains persistent
📖 Full Retelling
The Commerce Department reported that the U.S. economy grew at an annualized rate of just 1.4% in the fourth quarter of 2025, significantly below economists' expectations of 2.5%, while the Federal Reserve's preferred inflation gauge showed prices rising 3% annually in December, complicating the central bank's interest rate decisions amid persistent inflation above its 2% target. The disappointing GDP figures, adjusted for seasonality and inflation, indicate a notable cooling of economic activity as the year ended, despite earlier quarters showing stronger performance. This slowdown comes as the Federal Reserve continues to navigate the challenging task of taming inflation without triggering a more severe economic downturn. The data released Friday presents a complex picture for policymakers who must balance concerns about persistent price increases with signs of moderating economic momentum. The combination of weaker-than-expected growth and inflation remaining well above target creates a difficult scenario for monetary policy decisions in the coming months.
In economics, inflation is an increase in the average price of goods and services in terms of money. This increase is measured using a price index, typically a consumer price index (CPI). When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation...
In economics, economic growth is an increase in the quantity and quality of the economic goods and services that a society produces. It can be measured as the increase in the inflation-adjusted output of an economy in a given year or over a period of time.
The rate of growth is typically calculated ...
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of financial panics (particularly the panic of 1907) led to th...
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed. Interest rate periods are ordinarily a year and are often annualized when not. Alongside interest rates, three other variables determine total interest: principal sum, compounding f...
