Food, clothing, toys...rising prices are on everyone’s minds—especially at this time of year. The Federal Reserve and President Donald Trump are both having to fight the perception that average Americans are struggling with everyday costs, and it could be a make-or-break couple of weeks.
There will likely be no surprises about the Fed’s interest-rate decision on Wednesday, with traders pricing in an overwhelming chance of a quarter-point cut. But investors will be watching for a likely split between
policymakers, and also diverging economic projections, as the central bank weighs the risks of inflation and a slowing job market.
There was some relief about prices last week. The September 12-month PCE inflation
rate—the Fed’s preferred gauge—came in at 2.8%, in line with expectations. But that’s old data and still well above the 2% target. Meanwhile, consumers are expecting a 4.1% increase in prices in the year ahead according to a University of Michigan survey.
High inflation expectations are a worry for President Trump as well. He’s reported to be planning a national tour to tout his administration’s economic achievements, with the political stakes high ahead of next year’s midterm elections. The need to appear to be holding prices down could mean a softened
stance on tariffs, or even a tougher position on big mergers if reduced competition threatens to lead to higher prices. Trump raised concerns Sunday about Netflix’s planned acquisition of
Warner Bros. Discovery saying he would be personally involved in the decision.
It’s been a good year for Wall Street so far, with a nearly 17%-gain in the S&P 500, leaving the index sailing toward a third year
of double-digit growth. Analysts currently expect that to continue into next year, but Main Street’s affordability concerns could start to weigh, unless the Fed and the White House can show they have a grip on inflation.
—Adam Clark
***Join Barron’s senior managing editors Lauren R. Rublin and Ben Levisohn today at noon for a look at stocks in the news, what’s ahead for the Fed, and how to prepare your portfolio for the new year. Sign up here.
What’s Ahead for Markets in 2026? From “Liberation Day” tariffs to torrid rallies in AI stocks and gold, this year has been
full of surprises. Join us on Dec. 11 at noon for discussions with investment strategists and money managers about the outlook for the economy and markets in 2026—and how to position your portfolio for success. Sign up here.
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It’s the Fed’s Moment This Week as Rate Decision Looms
The Federal Reserve’s preferred inflation gauge edged up in September,
largely in line with economists’ expectations, likely opening the door for Fed officials to cut interest rates on Wednesday. Fed-funds futures reflect an 86.2% probability of a quarter-point cut, according to the CME FedWatch tool.
- The core personal consumption expenditures, or PCE, price index, excluding food and energy prices, rose 0.2% from August and 2.8% from last year, the Bureau of Economic Analysis reported. Headline PCE rose by a higher-than-expected 0.3% for September, and a 2.8% annual rise.
- The September data, released Friday after the 43-day government shutdown postponed government inflation readings, could factor less into the Fed’s decision-making than previous reports. The Fed will also release its quarterly Summary of Economic Projections,
with policymakers’ forecasts on future unemployment, inflation, and interest rates.
- Fed Chair Jerome Powell, who has said that there are risks to both stable prices and maximum employment, could signal no rate cuts early next year. If Powell casts doubt on future rate cuts, that could throw cold water on a December Santa Claus stock rally even if the Fed cuts rates.
- StoneX market analyst Fawad Razaqzada wrote that the key question is whether the Fed’s move can trigger such a rally, which is when stocks rise in the last five trading days of the year and the first two of next year. The S&P 500 forecast is “cautiously constructive,” Razaqzada said.
What’s Next: After December’s widely expected cut, Dave Grecsek, Aspiriant’s managing director of investment strategy and research told MarketWatch there is the potential for two to four more cuts in 2026, which could really drive up markets and trigger the Santa rally.
—Nicole Goodkind, Dan Lam, and Janet H.
Cho
Trump Will Outline His Economic Policies During National Tour
President Donald Trump’s aides say he is frustrated that his economic messaging isn’t registering with voters amid polling showing Americans disapprove of his handling of inflation. Seeking to reset things, Trump kicks off a national tour Tuesday in Pennsylvania to highlight his work on affordability and fighting inflation.
- Pennsylvania Republican Sen. Dave McCormick was among those on Sunday rallying support for the efforts. McCormick cited pledges by companies like Nippon and Hanwha to spend trillions of dollars in the U.S. and the spending on AI and data centers. “There’s more to come,” he told Fox’s Sunday Morning Futures.
- Trump appears frustrated by his administration’s messaging on affordability, his former chief of staff Reince Priebus told ABC’s This Week. And Former New Jersey Gov. Chris Christie, a Republican, told ABC that public opinion against Trump on the affordability issue conflicts with Trump’s belief that he is the economy president.
- Treasury Secretary Scott Bessent told CBS’ Face the Nation that the economy is better than expected now than what people predicted when tariffs were announced in April. He predicted the U.S. will end the year with 3% real GDP growth despite the longest government shutdown in U.S. history.
- Bessent told CBS that
imported goods inflation is below overall inflation as represented by the personal consumption expenditures index, which is around 2.9%. Imported goods inflation is more like 1.8%, he said. It is the service economy generating inflation, he said, and that has “nothing to do with tariffs.”
What’s Next: Priebus said getting the trade deals done is important but the administration may not wrap them up with Canada and China before the end of 2025. He said the question is whether the administration can convince voters it has made progress on the economy before next year’s midterm elections.
—Liz Moyer and Janet H.
Cho
Netflix’s Warner Bros. Discovery Deal Is Far From a Sure Thing
