Fed's "Wait-and-See" Stance: Key Economic Indicators for Investors

Based on my comprehensive research, I can now provide you with a systematic analysis of Fed Governor Cook’s “wait-and-see” stance and the key economic indicators investors should monitor to anticipate potential shifts in Fed policy trajectory.

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Federal Reserve officials, including Governor Lisa Cook, have adopted a

approach to monetary policy as of early 2026. This cautious stance reflects several key dynamics:

• Interest Rate Decision:
  The Fed held its benchmark rate steady at
  3.5%-3.75%
  at its January 2026 meeting, matching market expectations [1]
• Policy Rationale:
  After implementing 75 basis points of cuts in late 2025 to support a stalling labor market, officials now see a
  higher bar
  for additional easing [1]
• Neutral Rate Assessment:
  Fed Chair Jerome Powell indicated rates are now close to
  “neutral”
  —the theoretical level where policy neither spurs nor constrains economic activity [1]

Governor Cook’s stance aligns with the broader FOMC consensus: the Fed prefers to observe how the economy evolves before making further adjustments, given that

while growth remains resilient.

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The

is the Federal Reserve’s official inflation target metric and carries more weight than the Consumer Price Index (CPI) [2][3].

Metric	Current Status	Significance
Headline PCE	~2.6%-2.8% YoY	Still above 2% target
Core PCE (excludes food & energy)	~2.7%-2.8% YoY	Better predictor of underlying inflation
Monthly PCE	+0.3%	Rising trend concerning policymakers

The Fed has stated it “will not cut rates until confident that a temporary rise in goods prices isn’t bleeding through into broader inflation and expectations” [2][3].

While secondary to PCE,

data remains market-moving:

• Current CPI:
  2.7% YoY
  [1]
• Monthly readings provide early signals of inflationary trends

• Services sector:
  +3.5% YoY
  [3]
• Critical indicator as services comprise the largest share of consumer spending
• Often reflects wage-driven inflation dynamics

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The Fed’s

focuses on both price stability and maximum employment. Key labor metrics include:

Indicator	Current Reading	Significance
Unemployment Rate	4.4%	“Cool but stable” per Fed assessments [1]
Job Creation	~28,000/month	Modest but steady growth
Wage Growth	+0.1% monthly	Slowest since November; indicates cooling
Labor Force Participation	Declining trend	Fed watching carefully
Hiring Rates	“Low-fire, low-hire” environment	Structural shift in labor dynamics

The Fed noted “some signs of stabilization” in the labor market at its January 2026 meeting [1]. However, Powell cautioned that recent immigration changes have made labor data “difficult to interpret” [1].

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Metric	Current Reading	Trend
Q3 2025 GDP Growth	4.4% annualized	Fastest pace in two years
Q2 2025 GDP Growth	3.8%	Solid expansion
Q4 Forecast	~5.4%	Strong holiday boost expected

Robust economic growth gives the Fed room to maintain its restrictive stance without risking recession. The economy is described as being on “firm footing” heading into 2026 [1].

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• Consumer spending remains
  resilient
  despite higher rates
• Consumer sentiment shows
  improving trends
• Personal savings rate:
  4.5%
  (stable) [3]

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• Six FOMC members
  currently prefer holding rates steady [1]
• Median Fed official expects
  two rate cuts in 2026
  (December 2025 projections)
• Market currently prices
  72% probability of three quarter-point cuts
  totaling 75 basis points [2]

• Less than
  3% probability
  of a rate cut at the January 2026 meeting [1]
• Probability of September 2026 cut fell from 46.7% to 39% following recent data [3]

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• High tariff levels
  remain in place but haven’t been “a major inflation driver” yet [1]
• Fed is monitoring whether tariff-induced price increases prove transitory or persistent
• Powell: “We will respond quickly if the economy shows signs of a weakening labor market or inflation starts to rise markedly” [3]

• Ongoing developments (e.g., energy market disruptions) could alter inflation/growth outlook
• Supply chain concerns remain elevated

• Early 2025 economic data subject to
  large revisions
  due to government shutdown gaps
• Fed caution about relying on potentially distorted figures [1]

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Indicator	Release Frequency	Action Trigger
Core PCE	Monthly	Sustained move above 2.5% could delay cuts
CPI	Monthly	Headline above 3% raises hawkish concerns
Employment Situation	Monthly	Unemployment below 4% or above 5% significant
GDP Growth	Quarterly	Sub-2% growth may trigger easing consideration

Indicator	Significance
Fed Minutes	Reveal internal debates and policy direction
FOMC Projections	Update rate path expectations
Regional Fed Surveys	Early signals of economic trends
Productivity Data	AI’s impact on long-term growth potential

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• Core PCE consistently above 3%
• Wage growth acceleration
• Inflation expectations unanchoring
• Strong GDP growth with persistent price pressures

• Unemployment rising above 5%
• GDP growth below 2%
• Credit market stress
• Deflationary signals

1. Fixed Income:
   Monitor Treasury yields for early policy signals
2. Equities:
   Focus on sectors sensitive to rate changes (growth stocks, REITs)
3. Currencies:
   Dollar strength often correlates with hawkish Fed stance
4. Commodities:
   Oil and industrial metals sensitive to growth/inflation expectations

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Governor Cook’s “wait-and-see” stance reflects the Fed’s assessment that:

1. Inflation remains above target
   but showing mixed signals
2. Labor market is cooling but stable
   , not deteriorating significantly
3. Economic growth remains solid
   , providing policy flexibility
4. External risks
   (tariffs, geopolitics) require careful monitoring

Investors should prioritize

as the primary indicators for anticipating Fed policy shifts, supplemented by for comprehensive market positioning.

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[1] Fox Baltimore - “Federal Reserve back to wait-and-see with steady inflation and growth economy” (https://foxbaltimore.com/news/nation-world/federal-reserve-back-to-wait-and-see-with-steady-inflation-and-growth-economy-labor-market-unemployment-interest-rates)

[2] AP News - “PCE Inflation Report 2026: Fed’s Gauge Move Markets” (https://www.apnews.com/pce-inflation-report-2026)

[3] Fox Business - “June PCE: Fed’s favored inflation gauge ticked higher in June” (https://www.foxbusiness.com/economy/june-2025-pce-inflation)

[4] Business Insider - “Fed Meeting Recap: Interest Rates Hold Steady, Powell” (https://www.businessinsider.com/fed-meeting-january-interest-rates-jerome-powell-live-updates-2026-01)