The American Financial Services Association (AFSA) announced that stable December inflation, along with cooling labor conditions, could open the door for Federal Reserve rate cuts in 2026.
According to the Bureau of Labor Statistics (BLS), the Consumer Price Index for All Urban Consumers (CPI-U) increased by 0.3% in December 2025 and was up 2.7% from a year earlier, maintaining November’s 12-month pace. Core CPI, which excludes food and energy prices, rose by 0.2% for the month and 2.6% over the year. Shelter costs saw a rise of 0.4%, marking them as the largest contributor to the monthly gain, while food prices increased by 0.7%.
In its December 2025 Employment Situation report released on January 9, 2026, the BLS reported that payrolls rose by 50,000 and the unemployment rate remained at 4.4%. The report also indicated that average hourly earnings for private nonfarm workers increased by 0.3% in December to $37.02 and were up by 3.8% from a year earlier, supporting AFSA's view that wage growth has cooled compared with previous years.
Market expectations for Federal Reserve rate cuts in 2026 remain intact according to CME FedWatch data cited by Business Insider. The markets were pricing a 32% chance of two rate cuts, a 25% chance of one cut, and a 22% chance of three cuts, with only an 8% chance of no cuts by year-end.
Founded in 1916, AFSA is a national trade association representing the consumer credit industry. The association states its mission is to promote safe and ethical lending while protecting consumers’ access to credit and choice. It notes members provide products such as installment loans, vehicle financing, mortgages, and payment cards; AFSA is headquartered in Washington, D.C.
