The Fed has been taking a more cautious policy approach amid mixed signals from the economy. Economic growth has been occurring at the same time that inflation remains stubbornly above the central bankโs 2 per cent target. The job market is also slowing, adding another layer of concern to whether the central bank should continue cutting interest rates.
On Wednesday, the Labor Department will release its weekly data on applications for jobless benefits, which stands as a proxy for US layoffs.
โThe Fed has been balancing off inflation risks versus weakening labor markets and todayโs report further complicates their dilemma,โ wrote Dominic Pappalardo, chief multi-asset strategist at Morningstar Wealth, in a note to investors.
The Fed has cut interest rates three times in 2025 and the central bankโs rate-setting committee is divided about additional rate cuts in 2026. The committee members, at their last meeting, projected a wide range of possibilities from holding rates steady to two or more reductions.
Wall Street expects the Fed to hold rates steady at its upcoming meeting in January.
Consumer spending and confidence has been shaky amid worries about high prices, especially with a wide-ranging US trade war that could drive prices for many goods even higher.
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The latest update from business group The Conference Board showed that consumer confidence fell in December to its lowest level since tariffs were rolled out in April. Meanwhile, retail sales have been weakening, with consumers growing more cautious.
Consumers have become more targeted in their buying during the holiday shopping season, according to Visaโs Consulting and Analytics division. From Nov. 1 through Sunday, cash and credit card sales rose 4.2 per cent, which is less than the 4.8 per cent increase during the same period a year ago.
Markets were mixed in Asia and Europe.
The price of gold continued rising. It was up 0.6 per cent Tuesday and is up about 70 per cent for the year.
Oil prices were relatively stable after jumping a day prior. US benchmark crude rose 0.2 per cent and the price of Brent crude, the international standard, rose 0.1 per cent.
AP
