The latest PCE inflation data in the United States and the minutes from the recent Federal Reserve meeting indicate a significant shift in policymakers' stance. A 0.4 percent rise in price indices in December and a stable labor market have led central bankers to consider not only halting the cycle of cuts but even potential interest rate hikes. Financial markets are reacting with a stronger dollar and falling gold prices.
PCE Inflation Above Forecasts
The consumer price index rose by 0.4% in December, a result higher than analysts' expectations and a signal of persistent price pressure.
Hawkish Fed Meeting Minutes
Members of the FOMC are considering a scenario of rate hikes if inflation does not start converging to target, which cooled sentiment in equity and commodity markets.
Strong US Labor Market
The number of new jobless claims fell to 206 thousand, confirming the stability of employment despite high interest rates.
Pressure on Pound and Asian Currencies
A strong dollar is pushing the British pound sterling to monthly lows, and the Indian rupee breached the 91-per-unit barrier against the US currency.
The latest readings of the PCE index for December 2026 brought a negative surprise for investors counting on a swift easing of US monetary policy. Prices rose by 0.4% month-on-month, indicating persistent inflationary pressure. Simultaneously, the minutes from the Federal Open Market Committee (FOMC) meeting revealed deep divisions among board members. Some policymakers, including Governor Stephen Miran, openly suggest that the current labor market situation, where initial jobless claims fell to 206 thousand, provides no basis for hasty cuts. Since the 2008 financial crisis, central banks worldwide operated in an environment of historically low interest rates, which changed abruptly after the COVID-19 pandemic and the outbreak of a global inflation wave.The situation in the United States is impacting global currency markets. The Indian rupee recorded losses, exceeding the level of 91 per dollar, while the British pound sterling approached a monthly low. Central bankers in India are also showing a hawkish stance, keeping rates unchanged. Meanwhile, in the US, tension is growing between the Fed and the Donald Trump administration. White House officials are criticizing the central bank's reports on the impact of tariffs on prices, which may herald difficult cohabitation with the new candidate for Fed Chair, Kevin Warsh. „The labor market has performed somewhat better than I expected over the last few months, which calls for caution regarding further moves on rates.” — Stephen MiranInvestors have begun withdrawing en masse from assets considered safe havens. The price of gold fell below the $5000 per ounce level, reacting to rising US Treasury yields. Although the options market still prices in the possibility of cuts later in the year, the voice of hawks within the Fed is becoming increasingly clear. The central bank also confirmed that, at the request of the Treasury Department, it is monitoring the yen's exchange rate, suggesting readiness for currency intervention. Change in US PCE Inflation Index: 2025-10: 0.2, 2025-11: 0.2, 2025-12: 0.4206k — new US jobless claimsMarket Expectations vs. Fed Reality: Timing of First Cut: March 2026 → June 2026; Number of Cuts This Year: 3-4 → 1-2 or None; FOMC Rhetoric: Dovish → Hawkish
Mentioned People
- Stephen Miran — Federal Reserve Governor who revised his expectations regarding interest rate cuts.
- Kevin Warsh — President Trump's candidate for Fed Chair, advocating for significant rate cuts.
- Donald Trump — US President whose administration is putting pressure on the central bank regarding monetary policy.