Okay, here’s a macroeconomic report for Week 04 of 2026, following the format you’ve specified.

Update for Week 04 of 2026

Date: January 23, 2026 The global economic narrative this week centers on a tug-of-war between persistent inflationary pressures and signs of moderating economic growth. In the US, the labor market continues to show resilience, but cracks are beginning to appear in the housing sector. Central banks worldwide are maintaining a hawkish stance, carefully balancing the need to curb inflation with the risk of triggering a recession. The week’s data paints a picture of an economy at a critical juncture, where the path forward remains highly uncertain and dependent on how these competing forces play out.

1. Inflation

Inflation remains the dominant concern, though there are glimmers of hope that the worst may be behind us. The stickiness of core inflation, particularly in services, is proving to be a challenge for policymakers. Energy prices, while volatile, are not currently contributing significantly to upward pressure, but geopolitical risks remain a constant threat. Food prices are showing signs of stabilization, but supply chain disruptions and adverse weather events could easily reverse this trend.

  • Headline CPI/PCE: The Consumer Price Index (CPI) for December, released this week, showed a slight increase of 0.2%, bringing the annual inflation rate to 3.2%. The Personal Consumption Expenditures (PCE) price index, the Fed’s preferred measure, rose by 0.1% in December, with the year-over-year increase at 2.9%. While these figures are still above the Fed’s 2% target, the deceleration from earlier in the year is encouraging.
  • Energy Prices: Crude oil prices traded in a narrow range this week, hovering around $75 per barrel. Concerns about a potential slowdown in global demand are offsetting supply-side risks. Natural gas prices remain elevated due to colder-than-average temperatures in parts of the US and Europe.
  • Food Prices: The UN Food and Agriculture Organization’s (FAO) Food Price Index remained relatively stable in December, suggesting that global food prices may have peaked. However, domestic food prices are still elevated, reflecting higher labor and transportation costs. Quote: “We are committed to using our tools to bring inflation back to our 2% goal.” - Jerome Powell, Federal Reserve Chairman, Press Conference, January 22, 2026

2. Employment

The labor market continues to be a bright spot in the US economy, but there are signs that it is starting to cool. The unemployment rate remains low, but job growth is slowing, and wage pressures are easing. Labor force participation rates are holding steady, suggesting that the supply of workers is not increasing significantly.

  • Unemployment Rate: The unemployment rate remained unchanged at 3.7% in December.
  • Job Openings (JOLTS): The Job Openings and Labor Turnover Survey (JOLTS) showed a slight decrease in job openings in November, indicating that demand for labor is softening.
  • Wage Growth: Average hourly earnings rose by 0.3% in December, bringing the year-over-year increase to 4.1%. While still elevated, wage growth is decelerating, which could help to ease inflationary pressures. Quote: “The labor market is still very strong, but we are starting to see some signs of moderation.” - Lisa Cook, Federal Reserve Governor, Speech on the Economic Outlook, January 21, 2026

3. Housing Market

The housing market is facing significant headwinds from rising mortgage rates and declining affordability. Home sales are falling, and construction activity is slowing. Inventory levels remain low, but they are starting to rise in some markets, suggesting that the market is becoming more balanced.

  • Mortgage Rates: The average 30-year fixed mortgage rate rose to 6.8% this week, up from 6.6% the previous week.
  • Home Sales: Existing home sales fell for the eleventh consecutive month in December, reaching the lowest level in over a decade.
  • Construction/Starts: Housing starts and building permits both declined in December, indicating that builders are becoming more cautious in response to weakening demand. Quote: “The housing market is undergoing a significant correction, and we expect further declines in home sales and prices in the coming months.” - Lawrence Yun, Chief Economist, National Association of Realtors, Housing Market Report, January 22, 2026

4. GDP & Economic Growth

The US economy is showing signs of slowing, but it is still growing at a moderate pace. Consumer spending remains resilient, but business investment is weakening. The manufacturing sector is facing challenges from supply chain disruptions and weakening global demand.

  • GDP Estimates: The Atlanta Fed’s GDPNow estimate for fourth-quarter GDP growth is currently at 2.5%.
  • Manufacturing/Services PMIs: The Manufacturing Purchasing Managers’ Index (PMI) remained in contraction territory in December, while the Services PMI edged up slightly but remained below 50, indicating continued weakness in the sector.
  • Consumer Confidence: The Conference Board’s Consumer Confidence Index edged up slightly in December, but it remains below its long-term average. Quote: “We expect the US economy to grow at a slower pace in 2026, as the effects of higher interest rates and inflation weigh on demand.” - Jan Hatzius, Chief Economist, Goldman Sachs, Economic Outlook, January 20, 2026

5. Monetary Policy

Central banks around the world are maintaining a hawkish stance, signaling their commitment to bringing inflation back to target. The Federal Reserve is expected to continue raising interest rates in the coming months, but the pace of tightening is likely to slow. Market expectations for the peak federal funds rate have risen slightly this week.

  • Interest Rates: The Federal Reserve raised the federal funds rate by 50 basis points at its December meeting, bringing the target range to 4.25%-4.50%.
  • Fed Speak/Guidance: Fed officials have consistently emphasized their commitment to fighting inflation, even if it means risking a recession.
  • Market Expectations: Market participants are currently pricing in a peak federal funds rate of around 5% by the middle of 2026. Quote: “We are prepared to do whatever it takes to restore price stability.” - Christine Lagarde, President, European Central Bank, Press Conference, January 21, 2026

Conclusion

The global economy faces a complex and uncertain outlook. While inflation appears to be moderating, it remains above central bank targets. The labor market is still strong, but there are signs of cooling. The housing market is weakening, and economic growth is slowing. Central banks are walking a tightrope, trying to curb inflation without triggering a recession. The coming weeks will be critical in determining whether they can successfully navigate this challenging environment. The interplay between inflation, employment, and monetary policy will continue to shape the economic narrative in the weeks ahead.