A lot happened last week. Q4 GDP came in weaker due to the government shutdown, which shaved nearly a full percentage point off growth; the subsequent rebound from reopening should be strong, and we expect Q1 growth near a 3% annualized pace as consumers receive larger‑than‑expected tax refunds.

Fed minutes from the January meeting suggest projections may be too optimistic, as forecasts combining above‑potential growth with easing inflation are unusual and appear to rely on strong assumptions about productivity and AI‑driven investment.

Inflation is likely to run hotter in the near term, consistent with the ISM prices‑paid signal; December’s headline and core PCE each rose 0.4% month‑to‑month, pushing annual rates to 2.9% and 3.0%, and monthly readings closer to 0.1–0.2% are needed to confirm a sustained move back toward target.

source: lpl.com/research

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