Robust GDP Growth Reflects Economic Strength and Resilience

The Atlanta Federal Reserve’s GDPNow model forecasts similar growth for Q3, nearly 3.9%, indicating sustained momentum. This economic resilience shows that despite global uncertainties and soft labor markets, the US economy is on stable footing.

While overall GDP growth remains healthy, job creation has slowed, with payroll increases dipping below 100,000 jobs monthly—significantly less than prior years. However, economists and Treasury advisers emphasize that this slowdown is likely temporary. As investments pick up in manufacturing, construction, and services, hiring is expected to broaden and accelerate through 2026. This means unemployment rates should stabilize, improving job opportunities and wage growth for workers.

Inflation pressures are gradually easing: energy and food prices have dropped, rents have stabilized, and prices for consumer goods show minimal growth. Forward-looking inflation expectations remain within manageable levels, helping to reduce market anxiety. This easing trend is crucial as it allows the Federal Reserve to consider lowering interest rates without risking runaway inflation. Lower inflation combined with rate decreases will help sustain consumer purchasing power and business investments.

Federal Reserve Rate Policy: Outlook for the Coming Year

Currently, interest rates remain above the Fed’s neutral level—around 3%—with the federal funds rate near 4.25%. Experts anticipate that the Fed will implement rate cuts in the upcoming months to stimulate economic sectors vulnerable to high borrowing costs, especially housing and small businesses. Lower interest rates typically reduce mortgage rates, increase affordability, and boost economic growth and hiring. However, some Fed officials urge caution to avoid cutting rates too aggressively, emphasizing a balanced approach to maintain inflation control.

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