Friday delivered the economic data the Federal Reserve has been dreading: growth collapsed while inflation refused to budge. If you have a mortgage, a savings account, or a retirement fund, buckle up.

The Commerce Department reported that Q4 GDP grew at just 1.4%, badly missing the 2.5% estimate. For the full year, the economy expanded only 2.2%, down from 2.8% in 2024. At the same time, the core PCE price index—the Fed's preferred inflation measure—held firm at 3% in December, a full percentage point above target.

Translation: the economy is slowing down while prices keep rising. That's the textbook definition of stagflation, and it puts the Fed in an impossible position.

Let me explain why this matters for your money.

If you're waiting for mortgage rates to drop: Don't hold your breath. The Fed can't cut rates when inflation is running at 3%. Jerome Powell has made it clear that 2% is the target, and we're nowhere close. That means your 7% mortgage rate is sticking around, probably well into 2026.

If you have a high-yield savings account: Good news—those 5% APYs aren't going anywhere either. As long as the Fed keeps rates elevated to fight inflation, savers actually benefit. If you've been sitting in cash, this environment rewards patience.

If you're invested in stocks: This is where it gets messy. Slow growth is bad for corporate earnings. High inflation squeezes profit margins. The S&P 500 has been priced for a soft landing—steady growth with cooling inflation—and we just got the opposite.

The data gets worse when you dig in. Consumer spending, which drives 70% of the economy, came in under 2%. Government spending has been propping things up, but with budget fights looming, that support may evaporate. Business investment is stalling. The pillars holding up this expansion are starting to crack.

And here's the kicker: the 3% core PCE number might actually be understated. Some analysts believe that October and November data were artificially low due to a government shutdown, and future revisions could push the year-over-year number even higher. So the Fed's inflation problem may be worse than it looks.

What should you do?

For your 401(k): Stagflation historically favors commodities, energy, and real assets over growth stocks. That doesn't mean dump everything and buy gold, but it does mean reconsidering whether you really want to be 100% in big tech. Diversification isn't sexy, but it's designed for environments like this.

For your emergency fund: Keep building it. If growth keeps slowing, layoffs follow. High-yield savings accounts are paying well right now—take advantage while it lasts.

For new investments: Be selective. Companies with pricing power—the ability to raise prices without losing customers—tend to survive stagflation. Companies selling commoditized products at tight margins get crushed.

The Fed's next move is anybody's guess. They can't cut rates without letting inflation run hotter. They can't keep tightening without pushing the economy into recession. And they definitely can't fix the fact that fiscal policy, trade policy, and geopolitical chaos are all working against them.

Powell has spent two years trying to engineer a soft landing. Today's data suggests he might be out of runway.

If they tell you this is transitory, ask them what changed since the last time they said that.