The Macro Minute with Darius Dale Will the Q4 GDP and December PCE data force the Fed to revise its reaction function?
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Feb 20, 2026 A deep dive into how Q4 GDP and December PCE shape central bank behavior. Discussion of a resilient U.S. economy and a U-shaped recovery. Examination of sticky inflation and super-core price strength. Breakdown of components like government spending, imports, inventories, investment, and housing. Debate over trailing stops versus two-sided institutional risk management.
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Data Likely Won't Force Fed Shift
- The Q4 GDP and December PCE data are unlikely to force the Fed to change its reaction function.
- The data align with FOMC projections of ~2% real growth and 2.5–3% inflation.
Three Themes Reinforced By The Data
- The results support three core themes: Resilient U.S. Economy, U-shaped recovery, and Sticky Inflation.
- Q4 GDP and PCE deflators reinforced those themes through mixed real and nominal impulses.
U-Shaped Recovery Signals in Component Impulses
- Weak negative impulses in real GDP, real PCE, government purchases, and investment point to a U-shaped recovery.
- Imports and inventories' contribution falling suggests tariff effects peaked earlier in 2025.