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American consumers are getting crushed by inflation. Here's what's ahead.

Key Takeaways

• Inflation predictions from prominent forecasters vary widely, with some seeing inflation heating up while others expect it to cool relatively quickly.
  
• Tariffs are pushing up prices, but housing cost increases are simmering down, reducing a significant source of inflation.
  
• Estimates for core PCE inflation in 2026 range from 2.2% to 2.8%, compared to the most recent rate of 2.8% in September.
  

We're still waiting for consumer price increases to simmer down to the levels we got used to in the pre-pandemic years.

And if 2026 forecasts are correct, we may have to keep waiting.

Prior to 2021, prices as measured by the Personal Consumption Expenditures index excluding food and energy typically rose less than 2% each year. But in 2022, that key inflation measure surged to an annual increase of 5.6%, the highest in nearly four decades.

Economists' year-ahead forecasts for 2026 vary considerably, but most expect the key inflation measure to remain at least slightly above the Federal Reserve's target of 2% for at least another year.

Predictions are never easy, and they're made all the more complicated this year by the economy's many crosswinds. President Donald Trump's tariffs have pushed up consumer prices, and no one is certain exactly how long that will last. Another wildcard: Trump's crackdown on immigration, which could push up wages in industries where a lot of immigrants work, which in turn would potentially push prices higher.

What This Means For The Economy

Inflation levels are a key indicator for the economy, with far-reaching impacts on consumers' purchasing power, interest rates, business decisions and wages.

As of September, the latest available data show that consumer prices were up 2.8% over the year, as measured by core PCE, excluding the volatile prices of food and energy. Core PCE is the inflation benchmark used by economists and the Federal Reserve.

The median forecast among professional economists surveyed by the Federal Reserve Bank of Philadelphia predicts that core PCE prices will rise 2.4% at the end of 2026. In other words, they expect inflation to cool, but not to pre-pandemic levels.

Economists at Deutsche Bank were aligned with the medium forecast. They said they predict lower tariff rates and a slowdown in housing cost increases. However, they expect the economy to remain resilient and for the Federal Reserve to lower interest rates. That will keep inflation running at 2.25% or more through at least 2028, they said.

On the optimistic end of the spectrum, forecasters at Oxford Economics expect core PCE inflation to cool to 2.2% by the end of 2026, getting closer to the Fed's target. Like most economists, Oxford's Bernard Yaros said tariffs would push up prices for many things. However, he expects prices for one item to decelerate significantly, and it's a big one: housing.

Decelerating housing costs, not to mention smaller price hikes for financial services (things like brokerage fees), should push down overall inflation to nearly 2% in 2026, he wrote.

"While this will be welcome news for the central bank, households will be less inclined to cheer this milestone as they are still smarting from the cumulative rise in prices since the pandemic," Yaros wrote.

Taking the opposite view, Bank of America forecasters expect that core PCE inflation will remain at 2.8% by the end of 2026, the same as it is now.

"Tariffs should continue to trickle through into prices next year, keeping the core PCE above 3% through 3Q," BofA economists led by Aditya Bhave wrote in a commentary. "We project above-target inflation through end-2027."

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The "One Big, Beautiful Bill" will make it harder for some graduate students to take out federal loans.

Key Takeaways

• The Grad PLUS program will be sunset starting in the 2026-2027 school year. At the same time, some graduate students will see the amount they can borrow at the federal level reduced.
• Before taking out loans, graduate students should explore grants and scholarships, as well as opportunities to work for their school and federal tax breaks. If those options are exhausted, state-based and private lenders provide alternative options to federal student loans.

Starting with the 2026-2027 school year, graduate students will no longer have access to a key federal loan program to help them pay for their education, and many will need to find other options to finance their graduate degrees.

The "One Big, Beautiful Bill" has reduced the amount of loans students and their families have access to for all kinds of education costs.

Many graduate students will be affected, since the legislation eliminates their ability to take out Grad PLUS loans. In the 2024-25 award year, about 545,000 graduate students had a PLUS loan.

Who Is Affected

Students who have taken out a Grad PLUS loan before July 1, 2026, can still borrow PLUS loans for up to three more years, or until their program ends.

Additionally, starting in the 2026-27 academic year, non-professional graduate students will be limited to borrowing up to $100,000. Professional graduate students, including those studying medicine and law, can borrow a maximum of $200,000 in unsubsidized loans throughout their educational career.

Why This Matters

Limited access to federal loans for graduate students might force them to take out more expensive loans, with unfavorable interest rates or terms. That could leave them with debt for many years and could lead them to become delinquent or default on their loans, ultimately harming their personal finances for years to come.

These new limits replace the previous $138,500 cap, which applied to all graduate students. This new limit for non-professional graduate students is unlikely to impact many, since the average non-professional graduate student holds $80,550 in student debt after adjusting for inflation, according to the National Center for Education Statistics.

However, it may leave a coverage gap for professional graduate students, since many would have used the now-defunct Grad PLUS loan program to cover the remaining balance of their education. Medical students, whose degree costs on average $232,100, will find it especially challenging to finance their education.

"More of them are going to have to turn to the private sector and to look for either other types of loan programs or, better yet, for additional grant or scholarship funding," said Gail daMota, president of the Education Finance Council, a trade association representing nonprofit and state-based student loan organizations.

However, there are steps graduate students can take before they get a private loan to cover the gap. And if they must take out another loan to pay for their graduate studies, there are strategies to help navigate that landscape.

Before You Take Out Loans

Before taking out federal or non-federal loans, experts recommend exploring scholarships and grants from institutions, state and federal governments, and third-party organizations.

Graduate students also typically have employment options at their university, working as research or teaching assistants. In fact, those types of jobs can lead to more grants and scholarships, such as funding from the federal work-study program.

If a graduate student is working for a company instead, they should check if their employer has a tuition reimbursement program, daMota said. Students can receive up to $5,250 of employer-provided education assistance tax-free, which can be used toward books and supplies, tuition and fees, and student loan payments.

Additionally, the Lifetime Learning Credit is available to single taxpayers with an income of less than $90,000 and to those who file jointly with an income of less than $180,000. This tax credit allows undergraduate and graduate students to subtract a maximum of $2,000 of education expenses annually from their taxes.

If You Must Take Out Loans

If a graduate student still can't afford their tuition after exhausting all available grants, scholarships, and federal loans, private student loans can be a viable option. However, students should always be cautious about what kind of loan they are taking out.

When considering non-federal student loans, daMota suggests starting with state and nonprofit lenders. These types of loans typically use tax-exempt financing, known as qualified student loan bonds.

State and nonprofit lenders who use these bonds must set the interest rate for student loans at no more than 2 percentage points above the yield on the bonds. This is similar to how federal student loan interest rates are determined, and typically results in lower rates than those of private loans.

"Many of the non-profits and state-based organizations also manage the 529 plans and the scholarship programs for the state," daMota said. "By reaching out to those organizations, the student can also perhaps find some free financial assistance, reducing their need for student loans."

For-profit private student loan lenders can also be helpful for many graduate students, but borrowers need to understand the details of their loans, experts said. The most important thing is to confirm the loan interest rate before committing to a loan with the lender.

In some cases, private student loans can be more flexible than state or federally backed loans and may offer lower interest rates than Grad PLUS loans, said Bethany Hubert, a college lending and financial aid specialist at Going Merry, a branch of Earnest, a private student loan lender. State lenders may also be restricted by location and can only lend money to students who are going to school in-state.

"[Private student loans] can offer competitive interest rates, no fees, and flexible repayment options designed for borrowers still in school or early in their careers," Hubert said.

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U.S. stocks posted solid gains, but trailed precious metals and international equities indexes.

Key Takeaways

• AI, tariff turmoil and a weaker dollar helped shape the year's returns, rewarding investors in hard assets over digital ones.
• Demand from solar panels, data centers and EVs drove silver and copper to their best years in decades.

Close the books on 2025. The oldest money beat the newest as gold, adjusted for inflation, hit prices last seen during the Carter administration. Bitcoin, after doubling in 2024, slipped.

Silver surged 146%, leading all major asset classes. Platinum, palladium and gold claimed the next three spots. At the bottom: orange juice, down about 59%, erasing most of its gains in 2024.

What metal wasn't precious in 2025? Data centers need miles of copper. Every solar panel requires silver. Both metals soared. Gold prices peaked as investors sought a balm for trade-war jitters and central banks stockpiled bullion. Energy prices held up early in the year despite bombs dropping in Ukraine and Middle East hotspots, then sank on fears of a glut.

The daily headlines made 2025 feel relentless. Yet the VIX, the market's "fear gauge," fell 16%. Wall Street shrugged.

News of the day for Dec. 31, 2025

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Despite losing ground this week, major stock indexes are on track to post double-digit gains for the third consecutive year.

Stock futures are slightly lower as major market indexes come into the final day of 2025 on a losing streak; major stock indexes are set to post double-digit gains for the third straight year; Fed officials still see inflation risks in 2026, raising questions about whether another interest rate cut is coming any time soon; weekly jobless claims figures are due this morning; and gold and silver prices are sliding after margin requirements were raised again. Here's what investors need to know today.

Stock Futures Point to Lower Open on Last Day of 2025

Stock futures are pointing lower this morning after three straight days of modest declines for major indexes. Futures linked to the Dow Jones Industrial Average and the S&P 500 were recently down 0.1%, while Nasdaq futures slipped 0.2%. Bitcoin traded at $88,800 recently, up about $1,000 from late yesterday afternoon. The yield on the 10-year Treasury note, which affects borrowing costs on all sorts of consumer loans, was at 4.11%, down from 4.13% at Tuesday's close. The bond market closes at 2:00 p.m ET today and will be shut Thursday for the New Year's holiday. The stock market has a full day of trading today ahead of the break, and will operate as normal on Friday.

Another Year of Double-Digit Gains For Major Stock Indexes

Despite the sluggish finish to the year, the stock market extended its multiyear bull run in 2025. Coming into today's session, the benchmark S&P 500 has gained 17% this year, marking its third consecutive year of double digit gains. The Dow has risen 14% so far in 2025, and the tech-heavy Nasdaq Composite has surged 21%. Stocks rebounded from tariff turmoil early in the year, including a sharp drop in April that contributed to three straight months of declines in major market indexes. While investments in AI technology helped boost markets, stocks also got a lift from a series of interest rate cuts, resilient corporate earnings and continued strong consumer spending. Analysts see the fundamentals for more growth in 2026, despite the likelihood for more volatility and increased risks. The S&P and Dow are poised to finish the year with eight straight monthly gains.

Fed Officials Watching Inflation, Jobs Data as They Weigh Rate Moves

More interest rate cuts could be coming in 2026, minutes of the December meeting of the Federal Open Market Committee showed, but some central bankers indicated they wanted to see more improvement on inflation first. The meeting minutes, released late Tuesday, laid out the divide between Federal Reserve officials. Some argued that interest rate cuts are needed to shore up a weakening job market, while others said inflation remained too high to enact more rate cuts. Fed officials said they see fewer risks of inflation from tariffs, while emphasizing the need to monitor upcoming economic reports before moving again on interest rates. After the Fed cut rates in its last three policy meetings, analysts see a couple of rate cuts coming in 2026, though an expected change in leadership in May could change the path on interest rates. President Donald Trump is expected to nominate a board chair who would favor rate cuts.

Gold, Silver Slide as CME Raises Margin Requirements Again

Gold and silver prices are losing ground this morning after margin requirements for trading the precious metals were raised for the second time this week. Gold futures were recently down 1.4% at $4,325 an ounce, while silver futures tumbled more than 8% to $71.30 an ounce. Exchange operator CME Group again raised the margin requirement, increasing the costs for traders, after the precious metals soared to a series of record highs in recent weeks. Gold and silver have hit record levels as investors sought a safe haven from market volatility, geopolitical turmoil and a weakening U.S. dollar.

Jobless Claims in Focus Amid Concerns About Labor Market

Investors will be keeping a close eye on weekly jobless claims data this morning after unemployment rose to its highest level in four years last month. The report, scheduled for release at 8:30 a.m. ET, is expected to show that 220,000 filed for unemployment insurance last week, according to economists surveyed by The Wall Street Journal and Dow Jones Newswires. The most recent U.S. jobs report showed that unemployment stood at 4.6% in November. Federal Reserve officials are closely following the labor market after concerns over job losses spurred the central bank to enact a series of rate cuts in recent months.

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Consumer spending has been the engine of economic growth in the post-pandemic economy.

Key Takeaways

• Inflation is forecast to cool but remain above the Federal Reserve’s 2% target, raising uncertainty about whether the U.S. can truly achieve a “soft landing.”
• Economic growth may start strong in early 2026 but could slow later in the year as tariffs rise and immigration tightens, even as the risk of a full recession appears limited.

In recent years, the start of a new calendar year has also been accompanied by concerns about an impending economic recession; however, most forecasters expect the U.S. to steer clear of an economic downturn in 2026. But whether the U.S. economy sees the “soft landing” that some had forecast remains a question.

Most economists expect the U.S. economy to grow in 2026, thanks to the effects of the “One Big, Beautiful Bill” Act and increased AI spending. While economic growth is likely to continue, it’s also expected to be uneven, as tariff and immigration policies create economic headwinds. 

“The improved outlook reflects a more supportive fiscal policy environment, a less restrictive monetary policy setting, and a tariff regime that is not characterized by near-constant escalation as it was this year,” Wells Fargo economists wrote in their 2026 outlook.

However, inflation is also likely to stay elevated above the Federal Reserve’s target of 2%, raising questions about a soft landing in 2026. Economists have been looking out for a “soft landing” for the U.S. economy after the Federal Reserve began hiking interest rates to tame inflation. The so-called soft landing occurs when inflation returns to the Fed’s target without causing a recession.

Why This News Matters

Economists broadly expect the U.S. will avoid a recession in 2026, due to government spending from the “One Big Beautiful Bill” and increased investment in artificial intelligence. But inflation staying above the Fed’s 2% target raises questions about whether a true soft landing is achievable in the coming year.

Analysts See Range of Outcomes With Government Spending Policy, Tariffs Having an Impact

A Philadelphia Federal Reserve survey of 33 forecasters found that the average economists expect U.S. gross domestic product to grow at a rate of 1.8% in 2026.  The Philly Fed’s review also found that inflation, as measured by the Personal Consumption Expenditures price index, was likely to show price increases slowing to a 2.6% annual rate in the 2026 fourth quarter.

However, analysts put forth varying economic forecasts for 2026. 

For example, JPMorgan expects economic growth in the first half of 2026 to be around 3%, primarily driven by the stimulus effects from the OBBBA, but then slowing to between 1% and 2% growth in gross domestic product later in the year. Over that time, inflation is expected to fall from over 3% to near 2% by the end of 2026, approaching the Fed’s target inflation rate and fitting within the “soft landing” definition.

“Both economic growth and inflation should heat up in early 2026 due to OBBBA impacts. Thereafter, however, higher tariff levels and lower immigration will cause growth to slow and inflation to cool,” JPMorgan wrote in its 2026 investment outlook.

Softening Labor Market Could Help Lower Inflation

Wells Fargo wrote that “2026 would mark a directional improvement, with the softer labor market, well-anchored inflation expectations and the prospect for some tariff relief next year helping lead inflation lower."

And while economists may not see a recession coming in 2026, the public isn’t so sure. The predictions market website Polymarket is showing a 35% chance of a recession by the end of 2026.

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Key Takeaways

• Fed rate cuts would likely lower credit card and savings rates first, while auto loans and especially fixed-rate mortgages may stay high or even rise.
• How much consumers benefit will depend on credit risk, economic conditions, and long-term inflation expectations—not just Fed policy.

The Federal Reserve is leaning toward cutting interest rates again in 2026, but that doesn’t mean that all consumer borrowing costs would fall equally.

Credit cards and high-yield savings accounts are more closely tied to Fed policy, as the Fed has a heavier influence over short-term interest rates. Others are tied to how interest rates will evolve many years in the future, such as the 30-year mortgage—which can even rise when the Fed cuts rates.

The rates that individual customers pay depend on their credit history. Banks and other lenders charge more to those with lower credit scores or curtail their lending to higher-risk customers when the economy wobbles. 

Why This Matters

Lower Fed rates don’t translate evenly across consumer finances, meaning borrowers may see uneven relief. Understanding which rates move—and which don’t—can help consumers plan borrowing, saving, and refinancing decisions more strategically.

But the Fed’s rate cuts matter for all borrowing costs nonetheless. Here’s how Fed policy could affect different types of consumer products:

Credit Cards

Credit card APRs could fall somewhat if the Fed lowers interest rates, but Fed policy is just a part of credit card companies’ calculations.

APRs on credit cards remained above 20% this year, according to Fed data, far above the roughly 15% average in early 2022. The Fed’s rate policies do affect credit card APRs, but credit card costs also reflect lenders’ assessments of risks—both of the individual borrower and the broader economy.

Lenders saw much higher risk in 2022, when surging inflation pressured consumers and raised recession risks. 

The gloomiest forecasts didn’t pan out, with the economy defying expectations and skirting a downturn. Still, some lower-income consumers felt more pressure and fell behind on their debts.

Lenders haven’t gotten the all-clear yet, thanks to the mixed signals the economy is sending this year. Where the picture settles out in 2026 may drive whether card lenders loosen up and put downward pressure on APRs.  

Outlooks from credit card executives are “increasingly positive following an extended period of tight lending standards,” wrote Mihir Bhatia, a Bank of America analyst who covers major consumer lenders. 

“We believe that a meaningful portion of expected weakness in credit performance has already occurred, and we are now in the 'improvement' phase of the credit cycle,” Bhatia wrote.

Auto Loans

That sunnier forecast could bode well for auto loans, where the sharp rise in car prices following the COVID-19 supply crunches has made it harder for consumers to keep repaying their now-bigger loans.

Nearly 3% of auto loan balances flowed into serious delinquency in the third quarter, up from 2.9% a year earlier, according to a recent New York Fed report. That occurs when a borrower is at least 90 days late on a payment.

The worsening picture for auto loans contrasted with some slight improvement in credit card delinquencies. 

There is plenty that goes into determining auto loan rates—including the length of the loan, any down payment and the borrower’s credit score. Like with credit cards, rates on auto loans remain high compared to pre-COVID levels. The still-cloudy picture in the sector may mean auto loan rates take longer to fall. 

“With recency bias front and center, auto lenders remain more focused on consumer risk and employment levels than on the Fed rates,” Cox Automotive Interim Chief Economist Jeremy Robb wrote. “Because the Fed’s primary policy tool operates with a lag, material auto-loan relief will likely come in the spring or later.”

Deposit Rates

Banks are quicker to adjust the interest rates they pay consumers who deposit money with them, since lowering their expenses raises banks’ profitability.

That much has been clear with certificates of deposit and high-yield savings accounts, where the usually attractive interest rates are getting a bit less juicy. The top APY on a 1-year CD, for example, is down from 6% in July 2024 to 4.18% this month. 

Some banks also offer high-yield savings accounts, allowing consumers to earn more interest. While a few still pay more than 4%, many companies’ high-yield savings rates are comfortably below 4%, according to Vincent Caintic, a BTIG analyst who covers consumer lenders.

Rate cuts have “become deeper and more frequent recently,” Caintic wrote, perhaps because consumer lenders wanted to get ahead of 2026 rate cuts. 

One other possibility is that credit card companies anticipate a deceleration in consumer lending. If that’s the case, lenders wouldn’t need as many deposits to fund consumers’ elevated card balances—and they wouldn’t need to attract deposit customers with higher rates.

“We'd be surprised if this was the answer, however, as holiday spend so far has been strong,” he wrote in a Dec. 7 note

Mortgages

Those hoping to buy a home or refinance may be disappointed by the direction of mortgage rates.

Adjustable-rate mortgages should fall automatically, but fixed-rate mortgage rates may move sideways if the Fed cuts—or even rise. That’s because they’re partly based on the 10-year U.S. Treasury yield, the rate the U.S. government pays investors to borrow over a decade.

A lot can happen in 10 years. A recession could force the Fed to lower rates aggressively, perhaps holding down borrowing costs for years. A supercharged economy would force the Fed to keep interest rates higher over the decade, to ensure inflation doesn’t spiral. 

Investors may demand higher interest rates in the future if they think inflation will be permanently higher, since price gains eat away at their interest payments. It’s a risk that some say could occur if President Donald Trump’s yet-to-be-named Fed chair moves the Fed in an aggressively dovish direction. 

The 10-year yield has struggled to break below 4% this year—disappointing potential homebuyers by preventing mortgage rates from declining too much. Ralf Preusser, a BofA rates strategist, sees the 10-year yield staying “range-bound” around current levels and anticipates the 10-year even rising to 4.25% by year-end.

“The risks of a more persistent inflation overshoot and/or a structurally more dovish Fed are underpriced,” Preusser wrote.

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Though AI could lower inflation, its impact on the job market might be quick and brutal, one expert says.

Key Takeaways

• AI could significantly reduce inflation if it delivers on its labor-saving promises, one economist forecasts.
• Cooling prices are great news for Americans struggling to stay on a budget.
  
• Historically, revolutionary technology has tended to raise living standards, but the labor market transition could be painful.
  

If AI delivers on its promises, the economy of the future could have lower inflation and far fewer jobs.

That's according to Chen Zhao, chief global strategist at Alpine Macroeconomics, who believes that today's "jobless profit boom," fueled by AI expansion, will lead to a low-inflation, low-employment economy in the near future.

"The chances are ... that inflation will be all lower than 2% by the end of next year," Zhao said.

Cooling prices would be great for American households—at least for those who manage to stay employed in the AI-driven economy.

What This Means For The Economy

Some economists believe AI will reshape inflation and productivity trends, driving major shifts in the U.S. economy.

How AI Could Push Down Prices

Productivity improvements may drive inflation below the Fed's 2% goal, returning it to about the level it was before the pandemic disrupted global supply chains.

That would be a notable decrease from its current level of about 3%, and would prompt the Fed to lower its key interest rate in an effort to boost demand. (While too-low inflation is a nice problem to have, the Fed aims to keep it around 2% to encourage spending and keep the job market growing.)

Other economists and tech leaders have made similar predictions recently. Sam Altman, CEO of Open AI, told investors in March at a Morgan Stanley event that the technology's disinflationary effect is underappreciated. Rick Reider, senior managing director at investment firm BlackRock, called the technology a force that pushes costs down and output up, leading to lower prices.

"If technology has always aimed to do more with less, AI is a breakthrough in doing more with far less," he wrote in a recent blog post.

That price relief would come with a significant downside for workers displaced by the new technology. Indeed, the job slowdown has already arrived, although several factors beyond AI are discouraging employers from hiring, including uncertainty about trade policy and a significant decline in immigration.

Not everyone is convinced that AI will push down inflation, however. There are other forces pushing prices higher, including tariffs. In the short run at least, AI is pushing some prices up, not down. An analysis by Bloomberg found that wholesale electricity prices nearly quadrupled in areas near power-hungry AI data centers.

Indeed, several members of the Federal Reserve's policy committee believe inflation risks are high enough that the central bank should hold interest rates steady, rather than cutting.

And some experts see a risk that AI technology simply won't pan out and deliver the labor-saving benefits its proponents promise.

If AI Saves Labor, Who Will Reap The Rewards?

Amazon's October 2025 layoff announcement is emblematic of the AI's potential impact on the job market. The retail giant cut 14,000 corporate workers despite its profits rising, saying AI was making its operations more efficient.

"You're basically using technology to replace people, and you produce more output or more profit with the same number of people or less," Zhao said.

Zhao compared the situation of today's white-collar workers at risk of AI displacement to the manufacturing employees whose jobs were swept away by globalization in the 1990s and 2000s. Globalization made the U.S. richer overall, but decimated blue-collar workers whose jobs were outsourced.

"The shock could be very rapid and very profound," he said. "You can have a very large displacement of workers that need to be somehow taken care of."

Since the Industrial Revolution began, new technologies allowing more work to be done by fewer people have, over the long run, improved the standard of living for most people. The same is likely to be true of AI, Zhao said, but he warned the transition period could be painful, especially in an economy that is already characterized by high levels of inequality.

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Bath & Body Works aims to revitalize its brand by streamlining its operations.

Key Takeaways

• Bath & Body Works recently laid out a plan to zero in on its core products and make its digital and physical stores feel less overwhelming.
• A slump in consumer sentiment is weighing on many retailers, but Bath & Body Works is underperforming its peers, CEO Daniel Heaf said.

Some stores aspire to be basic. Bath & Body Works is one of them.

Bath & Body Works (BBWI) is simplifying its approach after its sales slipped 1% year-over-year and adjusted income fell 33% in the fiscal third quarter that ended in early November.

The retailer known for soaps, candles and skincare products overlooked its core inventory while trying to woo younger consumers, CEO Daniel Heaf said, and grew too dependent on big-name collaborations and promotions.

To regroup, the company will focus on traditional offerings, prioritize "clean" ingredients, and streamline the way its inventory appears in physical and digital stores, Heaf said on a conference call last month. The company—and its boss—aims to revive a stock that has cratered in 2025.

"The customer tells us that our proposition in-store is too overwhelming and confusing," Heaf said, according to a transcript made available by AlphaSense. "The outcome that we want is to be able to entice new consumers into our stores and onto our digital platforms. They [should be able to] find what they want easily and fall in love."

Why This Matters

Amazon has had some success in attracting high-end brands like Dolce & Gabbana and Estée Lauder. While Bath & Body Works has a more affordable positioning, it cited luxury sellers' move to Amazon as evidence that joining the platform won't weigh on the Bath & Body Works brand.

Bath & Body Works is stepping back from hair care and men's grooming products to focus on the home fragrances and body care products people expect, Heaf said. The brand will continue refining its inventory—and lean into "clean" ingredients—while running fewer, more targeted marketing campaigns, he said. Bath & Body Works is also refining its website and app, and is preparing to launch on Amazon (AMZN).

Bath & Body Works has been lagging behind others in the sector, Heaf said, while acknowledging that consumer caution has made the environment more competitive.

The retailer expects fiscal fourth-quarter sales to come in lower than last year and has lowered its outlook for the full fiscal year. It's looking to cut costs while giving its so-called Consumer First Formula time to work.

"The whole company is working with the utmost urgency," Heaf said. "But this will take time. [Next year] will be a year of investing behind our brand to strengthen our fundamentals and position our business for sustainable long-term growth."

Shares of the company lost a quarter of their value on the day the third-quarter results were released. The stock is down about 50% since the start of 2025.

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The Federal Open Market Committee has cut the Fed's key lending rate at each of its last three meetings, amid concerns about weakness in the labor market.

Key Takeaways

• While Fed policy committee members remained divided over whether to cut interest rates, minutes from their December meeting showed that most would support rate cuts if inflation continues to decline.
• Fed officials saw fewer risks that tariffs would drive up inflation, and more saw risks that the labor market could begin to deteriorate if rates remained too high.
• But a rate cut in January remains far from certain, as several members said that the central bank must make sure inflation doesn’t move higher before moving to cut again.
  

The Federal Reserve could move forward on more interest rate cuts if inflation continues to move lower, though officials remain divided about what recent economic data is telling them, minutes from the Fed policy committee's most recent meeting showed.

“Most participants judged that further downward adjustments to the target range for the federal funds rate would likely be appropriate if inflation declined over time as expected,” according to the minutes, released Tuesday, of the Federal Open Market Committee’s (FOMC) meeting on Dec. 9-10.

Why This is Important

The federal funds rate influences borrowing costs on a range of consumer and business loans. Setting rates at the right level can encourage economic growth and boost the labor market without making products and services too expensive for consumers.

The Federal Reserve cut interest rates for a third straight time during its December meeting as FOMC members saw more risk of a weakening labor market, even as inflation has remained above the Fed’s target of 2%. But it wasn’t a unanimous decision. Fed Governor Stephen Miran, a recent appointee of President Donald Trump, voted for a steeper rate cut at the meeting, while two other members voted to keep rates steady amid persistent inflationary pressures. 

The minutes showed that many FOMC members were seeing fewer risks that tariffs would drive inflation consistently higher. The observation came before the latest Consumer Price Index (CPI) report showed that inflation came in at 2.7% in November, down from the 3% annual increase in prices that the prior report showed.

While FOMC members see more rate cuts on the horizon in 2026, it's far from certain that the fed funds rate will be cut at the January meeting. If inflation doesn’t significantly move lower and the Fed continues to cut, some members worry that the Fed’s commitment to its 2% inflation target will be questioned.

“Some participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for some time after a lowering of the range at this meeting,” the minutes showed.

The minutes showed that many FOMC members believed it was important to lower interest rates to counter the emerging weakness in the labor market. Indeed, the jobs report released days after the meeting showed that unemployment had risen to 4.6%, its highest levels since 2021. 

“Most participants noted that a move toward a more neutral policy stance would help forestall the possibility of a major deterioration in labor market conditions,” the minutes said.

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The price of gold has risen 65% this year, far outpacing the performance of the stock market and cryptocurrencies.

KEY TAKEAWAYS

• The price of gold, driven by a confluence of factors, rallied to repeated new highs in 2025.
• Investment demand likely will persist in 2026, particularly if the global economy cools.
• Structural portfolio reallocation could further support the price of gold.

Gold investors enjoyed an almost unprecedented price rally in 2025. The question now is how much the market run persists into the new year.

In a world fraught with geopolitical and economic uncertainty, gold's safe-haven reputation thrived this year as it had not since the high-inflation era of the late 1970s and early 1980s.

The precious metal's price has surged about 65% this year, far outpacing the performance of virtually all other risk assets, including U.S. stocks, global bonds and cryptocurrencies.

Spot gold prices hit an all-time high of around $4,560 per troy ounce last Friday before sliding more than 4% on Monday, as exchange operator CME Group raised its margin requirements for precious metals contracts and investors booked profits. Gold rebounded on Tuesday, trading recently at around $4,400.

Most analysts expect gold's bull run to moderate somewhat in 2026. That said, most see the only way gold will fall next year is if global economic growth exceeds expectations -- and it could surge in the event of a substantial global slowdown.

Why This Matters to Investors

The price of gold has soared as investors have turned to the precious metal as a store of value amid economic and geopolitical uncertainty. The factors that have spurred the rally remain in place, underscoring the value of having gold in an investment portfolio.

What Drove the 2025 Rally

A confluence of factors created the perfect storm for 2025's rally, not the least of which centered on geopolitical turmoil. President Donald Trump's tariffs ignited inflation concerns, and more investors parked their money in gold as a result. Events in the Middle East and the war in Ukraine contributed to global uncertainty.

Inflows into exchange-traded funds tell the story. As of November, global ETFs owning physical gold added assets for six straight months. Global gold ETFs now have a little more than a half trillion dollars in assets, with inflows on track for their strongest year ever.

The depreciating U.S. dollar also steered more investors to gold, particularly central banks. The dollar has fallen about 10% this year versus a basket of global currencies, and more central banks are turning to gold rather than the dollar to house their reserves.

Meanwhile, the Federal Reserve's decision to lower interest rates made gold more attractive versus assets that produce a regular yield. Those cuts came in an environment in which concerns about global debt increased and the U.S. government shut down for more than a month.

What Lies Ahead

Most analysts see the price of gold settling between $4,000 and $5,000 per troy ounce in 2026, with caveats.

For instance, Goldman Sachs has a price target of $4,900. But the firm sees "significant upside" potential to that target if investors shift more of their traditional equity and bond exposure to gold ETFs.

State Street has a target of $4,000-$4,500 but says that "strategic reallocations and geopolitical factors could create a tailwind for gold to reach $5,000 per ounce."

The World Gold Council has four different scenarios, only one of which calls for declining gold prices. That's if economic growth triggers inflation, forcing the Fed to raise interest rates, and the dollar rises.

Conversely, the group sees a material slowdown in global growth pushing gold prices up another 15-30%. Otherwise, it foresees prices staying steady to up 15%.

As for the Fed, most analysts view the impending appointment of a new Fed chair as positive for gold. That's because Trump plans to appoint a chair more amenable to lowering interest rates.

Strong demand likely will persist from central banks, meanwhile. A World Gold Council survey shows 95% of central banks expect to increase their gold reserves in the coming year.

Finally, physical demand for gold bars and jewelry could support higher prices. Demand in Asia and India has remained strong despite higher prices, State Street said.

"Strong pockets of physical demand that are non-cyclical (central banks) and idiosyncratic (China demand) add to gold price support and dampen downside risks," State Street said in a research report.