The U.S. economy slowed more than expected over the final months of 2025, federal government data on Friday showed.<\/p>\n
The economy grew at an annualized rate of 1.4% in the fourth quarter in the government’s initial estimate, marking a cooldown from blistering-hot 4.4% growth recorded in the previous quarter.<\/p>\n
The fresh reading of gross domestic product<\/a> on Friday provided a key measure of the country’s economic health as policymakers continued to grapple with an ongoing bout of elevated inflation<\/a> and sluggish hiring<\/a>.<\/p>\n Inflation cooled<\/a> in January, dropping price increases to their lowest level in nine months. While the pullback defied fears of a tariff-induced rise in overall costs, inflation continued to hover above the Federal Reserve’s target rate of 2%.<\/p>\n Meanwhile, a recent jobs report showed<\/a> stronger-than-expected hiring in January, even though an updated estimate released at the same time indicated a near-paralysis of the labor market last year.<\/p>\n A boost in consumer spending helped propel the surge in GDP over three months ending in September, the U.S. Commerce Department<\/a> previously said.<\/p>\n In this Jan. 28, 2026, file photo, U.S. Federal Reserve Chair Jerome Powell speaks during a press conference in Washington, D.C.,<\/span><\/span><\/span><\/p>\n Jonathan Ernst\/Reuters, FILE<\/span><\/p>\n<\/div>\n<\/figcaption><\/figure>\n<\/div>\n<\/div>\n<\/div>\n Retail sales data last week showed flat performance in December, however, suggesting possible weakness for shoppers during the holiday season. Meanwhile, credit-card debt levels have climbed and consumer sentiment has remained<\/a> glum.<\/p>\n Consumer spending, which accounts for about two-thirds of U.S. economic activity, is a key bellwether for the outlook of the nation’s economy.<\/p>\n Over the past year, hiring has slowed dramatically while inflation has remained elevated, risking an economic double-whammy known as “stagflation<\/a>.” Those conditions have put the Federal Reserve in a difficult position.<\/p>\n The central bank must balance a dual mandate to keep inflation under control and maximize employment. To address pressure on both of its goals, the Fed primarily holds a single tool: interest rates.<\/p>\n The strain on both sides of the Fed’s mandate presents a “challenging situation” for the central bank, Fed Chair Jerome Powell said in December.<\/p>\n The Fed held<\/a> interest rates steady at its most recent meeting in January, ending a string of three consecutive quarter-point rate cuts.<\/p>\n Futures markets expect two quarter-point interest rate cuts this year, forecasting the first in June and a second in the fall, according to the CME FedWatch Tool<\/a>, a measure of market sentiment.<\/p>\n<\/div>\n![\"Business](\"https:\/\/i.abcnewsfe.com\/a\/dec0e1d2-43f1-44fc-96e3-7963e97f29e5\/jerome-powell-rt-jt-260219_1771528781254_hpEmbed_3x2.jpg?w=375 "\\"Business")
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