The BareStory
The United States economy expanded at a 4.3% annualized rate in the third quarter of 2025, marking its most rapid pace in two years, according to data released by the Commerce Department. The growth, which was an increase from the second quarter's 3.8% rate, surpassed economists' forecasts. The department stated that the expansion was propelled by an acceleration in consumer spending, an upswing in exports, and increased government spending.
Alongside the strong growth, inflation also rose. The Commerce Department reported that the personal consumption expenditures (PCE) price index, a key inflation measure, increased at a 2.8% annual pace, up from 2.1% in the prior quarter. Core PCE, which excludes food and energy costs, grew 2.9%. Both figures are above the Federal Reserve's 2% inflation target. A slowdown in hiring was noted in the second half of the year, with the unemployment rate rising to 4.6% in November, its highest level since 2021.
The robust economic data has prompted differing views on the path of monetary policy. National Economic Council Director Kevin Hassett stated his view that the Federal Reserve is not reducing interest rates quickly enough. In contrast, Cleveland Fed President Beth Hammack said over the weekend that she believes rates should be held at their current level for several months, stating that inflation concerns still outweigh weakness in the labor market.
Some economists have expressed expectations of a slowdown. An analyst from Capital Economics forecast that the economy will grow at an annual rate of about 2% in the fourth quarter, citing the impact of a 43-day government shutdown. An analyst at Pantheon Macroeconomics described the third-quarter growth as "unsustainable," adding that there are signs of a slowdown in the fourth quarter. Following the GDP report, U.S. Treasury yields edged slightly lower on Wednesday.
How it may affect me
As a U.S. reader:
• The ongoing debate over interest rates will affect your borrowing costs. Holding rates steady keeps loans expensive, while cuts could lower payments for mortgages and cars.
• Rising unemployment and a slowdown in hiring may signal a more challenging job market, potentially making it more difficult to find or change employment.
• Inflation remains above the central bank's 2% target, meaning the cost of living may continue rising and reduce the purchasing power of your income.
• Some economists predict a slowdown, citing unsustainable growth. This suggests potential future uncertainty for businesses and jobs, though the exact impact is not yet clear.
