Now that 2026 has arrived, what can we expect from the US economy? One expert says, fanciful hopes aside, that the prudent position is simply wait and see.
"The estimation during 2025 was that there would be one Federal Reserve interest rate cut for 2026," BankRate economist and analyst Stephen Kates says, "but the market odds are for two or three cuts" this year.
"It's no surprise that we heard [from Federal Reserve Bank of Philadelphia President Anna Paulson on Saturday] that she and other Fed governors are pausing now" to assess the data that's been coming in from the financial markets.
"The government shutdown still casts a long shadow over the economy -- we can look back to just the inflation report that we got in December that covered October and November data and it was a huge downside surprise.
"The more you look at that data and the conditions that led to it -- that is, a lack of data collection in October -- the more it calls into question the validity of that data. So, in fact, we need more data and not just individuals," the Fed needs more data too, Mr. Kates says.
"Is inflation under control? I think it's reasonable to think that inflation has cooled," but in the absence of very precise data, the kind of data the Fed needs to make decisions, a "wait and see" mindset at the Fed over what to do next is reasonable, he adds.
"The Fed's always holding back a little bit because what they say has such market-moving potential, but the Philly branch President Paulson is a moderate with a dove-ish tilt, but there's no other route to go, you've got to have the data you need to know where to go, and it's a good thing we'll have that data as the month moves along."
There is even talk of another government shutdown if Congress doesn't get rolling to pass budget-related bills in the next 3-4 weeks, but luckily new data will come pouring in before we get to that point.