By Martin Baccardax

Inflation isn't really a problem. Unless, of course, you need to feed your family, heat your house, pay for your healthcare or send your child to college. Then it gets tricky.

And despite all the attention on the Federal Reserve, the kind of inflation Americans feel most acutely is exactly the kind the Fed can't affect with its key policy tool.

That's going to create a difficult economy to navigate over the coming months for investors, central bankers and, ultimately, the lawmakers that face reelection later in the year.

Headline inflation ended the final month of last year on a high note, according to data published Friday, with pressures rising close to the 3% threshold and well ahead of Wall Street forecasts.

As a kicker, the first estimate of fourth quarter GDP was also light of expectations, with growth prospects trimmed by the government shutdown and persistent trade deficits.

That's not to suggest the economy is heading toward some sort of stagflation lull; artificial intelligence spending, a job market that continues to defy gravity, at least in terms of layoffs, and a consumer still willing to spend is likely to keep things ticking over for a good few quarters to come.

But what we are likely to see is an economy, and by extension a stock market, that is moving beyond the influence of Fed rate policy as price pressures outside of its remit continue to build.

Beef prices, for example, have been rising steadily since the pandemic, and were last pegged 15% higher to last year's levels. Ground beef is up 72% over the past five years, with FDA data suggesting cumulative 28% gains in chicken prices and a 22% rise in pork costs.

And with cattle herds at the lowest levels since the early 1950s, no amount of Fed easing is going to make steaks or burgers any cheaper over the coming year.

Energy costs, meanwhile, are spiraling out of control. AI data center demand is a key component, of course, but U.S. foreign policy, alongside a weaker greenback, has offset the benefits from record domestic production.

WTI crude is up 20% over the past two months, and with the threat of attacks on Iran looming, it's safe to bet prices won't be in retreat anytime soon.

Electricity prices, meanwhile, are rising by nearly 7% a year, more than double the rate of headline inflation, according to Goldman Sachs estimates. The bank sees costs rising another 6% a year through 2027.

No parent with a child in college will be surprised to learn that higher education costs are soaring, as well. J.P. Morgan Asset Management says tuition has been rising at an annual 5.6% clip since 1983, doubling every 12 years.

The Higher Education Price Index, put together by asset management group Commonfund, has been rising 3.4% each year since 2020, with the benchmark's three highest readings recorded over that same time frame.

Healthcare is another cost eating into the wallet of the American consumer, and one that isn't likely to recede in the face of Fed rate cuts.

The U.S. Healthcare inflation rate was last pegged at 3.69%, the highest in three years, and the expiration of tax credits tied to buying insurance under the Affordable Care Act is likely to raise the overall burden even higher.

ACA premiums, in fact, are set to double this year to a national average of $1904 a month, according to health policy research group KFF. That won't be reduced by a lower fed-funds rate.

The broader picture is likely to be complicated by Friday's Supreme Court ruling, which deemed president Trump's use of emergency powers to justify tariffs illegal.

Removing those levies is likely to slow headline CPI readings over the back half of the year, given that the bulk of the tariffs were imposed in August 2025.

That's likely to stoke Fed rate cut bets and stocks prices, and indeed the odds of summertime reductions are moving higher, according to the CME Group's FedWatch tool, and the S&P 500 is now back to testing fresh all-time highs.

But the broader cost burden of the average American family, the undisputed linchpin of the economy's consumer growth engine, will remain unchanged.

How that hits the bottom line of American companies, especially those benefiting from the continuing rotation away from megacap tech stocks, remains to be seen. But it stands to reason that the more money spent on things like food, power and healthcare, the less there is to splurge elsewhere.

The corollary is lower sales, thinner margins and smaller corporate profits.

Especially in a job market with the weakest rate of new hires, outside of the pandemic, since the 2008 financial crisis.

Inflation might be moving in the direction that Wall Street likes, but affordability on Main Street could end up being a much bigger concern.

Write to Martin Baccardax at martin.baccardax@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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February 20, 2026 13:19 ET (18:19 GMT)

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