US GDP Growth Stalls in Fourth Quarter as Inflation Remains Sticky

This figure sits well below the 3.0% economists expected and marks a sharp deceleration from the 4.4% recorded in the third quarter. The Bureau of Economic Analysis data confirms that the post-pandemic growth engine is steadily losing momentum.

A complex economic picture

For the full year of 2025, the US economy expanded by 2.2%, a step down from the 2.8% seen in the prior year. The BEA pinned the fourth-quarter slowdown on dwindling government spending and cautious consumer habits, though a burst of corporate investment offered a partial offset.

However, the stalling growth is complicated by persistent price pressures. The Personal Consumption Expenditure index rose to an annual rate of 2.9% in December, slightly above November's 2.8% and consensus forecasts. The increase was driven largely by goods, specifically clothing, footwear and energy.

Stripping out the volatile food and energy sectors, the picture is even more challenging for policymakers. Core PCE hit 3.0%, surpassing expectations of 2.8%. Given this is the preferred inflation measure of the US Federal Reserve (Fed), the data presents a clear obstacle to any near-term rate cuts.

Relying on artificial intelligence

Faced with this challenging environment, the Fed appears to be looking to technology for a structural boost. The January policy meeting minutes reveal a committee hoping that artificial intelligence will drive productivity and support the broader economy.

According to the minutes, policymakers noted that the strong pace of AI-related investment, alongside higher productivity growth in recent years, could continue to support economic activity in 2026. Yet, officials acknowledged their anxiety over sticky inflation. They admitted the pace of the decline remained uncertain, adding that progress might be slower and more uneven than generally expected. The committee also estimated that the inflationary effects of recent tariffs on core goods would likely start to diminish this year.

Markets shrug off the data

Traders reacted to the data with notable restraint. S&P 500 futures slipped by a modest 0.3% following the release. Traditional currency pairs were similarly unaffected, with the euro flat against the US dollar at $1.17.

The crypto markets also remained calm. Bitcoin drifted down by just 0.5% to a little under $67,000 in the immediate aftermath. This muted reaction suggests investors may have already priced in a scenario where the Fed is constrained by persistent inflation. For the crypto sector, a cornered central bank and sticky inflation often provide a strong use case for decentralized assets, though the immediate market response suggests a wait-and-see approach.