What's happened
The US GDP increased by 3.8% in Q3, driven by consumer spending and exports, but inflation remains above the Fed's target at 2.8%. The Federal Reserve's rate cuts are unlikely in January due to inflation concerns, despite signs of a slowing labor market.
What's behind the headline?
The US GDP growth of 3.8% in Q3 signals resilience despite inflation concerns. The rise in consumer spending and exports indicates underlying strength, but persistent inflation at 2.8% suggests the Fed will maintain a cautious stance. The slowdown in private investment and job creation, alongside rising unemployment, points to a potential moderation in economic momentum. The Fed's rate cuts in January are unlikely, as inflation remains above target, and policymakers will prioritize price stability over short-term growth. This scenario underscores a delicate balancing act: supporting growth while preventing inflation from spiraling further. The market's reaction, with stocks turning lower, reflects investor apprehension about the Fed's future moves and the sustainability of current growth levels.
What the papers say
The Independent reports that the US GDP grew by 3.8% in Q3, with consumer spending and government expenditure boosting growth, but inflation remains high at 2.8%. AP News highlights that despite the growth, inflation and a slowing labor market—evidenced by rising unemployment to 4.6%—are likely to prevent rate cuts in January. Both sources agree that the economy has continued to expand at a healthy rate outside of the first quarter, but inflation and employment concerns are key factors influencing monetary policy. The Independent emphasizes the impact of increased expenditures at the state and federal levels, while AP News notes the decline in private investment and job creation, suggesting a cautious outlook for 2026.
How we got here
The US economy rebounded strongly after a brief contraction in Q1, with growth driven by increased consumer spending and government expenditure. Despite aggressive rate hikes in previous years to curb inflation, the economy has continued to expand, though inflation remains above the Fed's 2% target. The labor market shows signs of slowing, with rising unemployment and reduced job creation, influencing monetary policy decisions.
Go deeper
Common question
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How is the US economy performing in late 2025?
The US economy has shown strong growth in 2025, with a 3.8% increase in GDP in Q3. Despite this growth, inflation remains above the Federal Reserve's target, and the labor market shows signs of slowing down. Many are wondering what this means for consumers, interest rates, and the future of the economy. Below, we answer some of the most common questions about the current state of the US economy and what to expect moving forward.
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The Federal Reserve System is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of financial panics led to the desire for central control of the m