Economic Data Support a Fed Pause as Elevated Rates Extend into Early 2026
- Ed Sullivan
- Jan 14
- 2 min read
Breaking News: Market Update
Two inflation reports released this week show that U.S. consumer prices are holding stable, while producer prices are accelerating. Headline CPI was up 2.7% year over year, in line with expectations. Core Consumer Price Index (CPI) (excluding food and energy) rose 2.6% annually, slightly softer than expected. On the producer side, PPI increased at an accelerated pace of 3.0% compared to a year ago. Softer consumer inflation and stronger producer inflation suggest that businesses have been absorbing a disproportionate share of the tariffs.
Last week’s employment report underscored labor market deceleration, with only 50,000 jobs added in December, even as the unemployment rate ticked down to 4.4%. Wage growth remains positive but not robust enough to stoke labor-cost-driven inflation.
Together, these data — along with a robust retail sales report — depict an economy characterized by moderate growth, elevated inflation, and cooling, but not collapsing, labor markets. Given the strength in retail sales and still-elevated inflation, the Federal Reserve will likely resist cutting rates at the next Federal Open Market Committee (FOMC) meeting later this month. This keeps our 2026 outlook for inflation, employment, and interest rates on track. Our forecast continues to point to elevated interest rates and soft conditions for private construction through the first half of the year.
About The Sullivan Report
The Sullivan Report delivers subscription-based economic forecasts and market intelligence for the cement, concrete, construction, and building materials industries. Led by award-winning economist Ed Sullivan, its flagship U.S. Cement & Construction Outlook provides five-year forecasts and expert analysis to support strategic decision-making. Learn more at TheSullivanReport.com or contact info@thesullivanreport.com.
