US fourth-quarter gross domestic product expanded at just 0.7 percent, a dramatic deceleration from the prior quarter's 4.4 percent pace, signaling a meaningful slowdown in economic momentum heading into 2025. The data arrives alongside mixed inflation readings that suggest price pressures remain elevated despite the Federal Reserve's rate-cutting cycle.
The Personal Consumption Expenditures Price Index rose 0.3 percent month-over-month in January, matching economist expectations and decelerating from December's 0.4 percent increase. However, on an annualized basis, the headline PCE printed at 2.8 percent year-over-year, slightly below the 2.9 percent forecast, while core PCE—which strips out volatile food and energy—climbed to 3.1 percent, matching expectations but remaining above the Fed's 2 percent target.
The combination of weakening growth and sticky core inflation pressures may complicate Federal Reserve policy decisions in coming months. Markets had priced in potential interest rate cuts for 2025, but softer growth coupled with inflation still running above target could force policymakers to maintain a cautious stance longer than previously anticipated. Cryptocurrency markets typically benefit from lower interest rates and accelerating growth; the mixed economic backdrop suggests elevated volatility ahead.