What is really happening with the United States economy.
Because while the numbers point to growth, citizens feel the exact opposite. And somewhere there, uncertainty is born. What will the Fed do? What does all this mean for interest rates?
GDP GROWTH
Let’s start with GDP. In the third quarter of 2025, the US economy recorded growth of 4.3%. A surprise figure, since most analysts were expecting something around 3.2 to 3.3%.
If you are wondering where this increase came from, the answer is consumer spending. Americans spent more, especially ahead of the expiration of subsidies for electric vehicles, and this gave a significant boost. If we also add exports, government spending, and corporate profits, which rose by $166 billion, we get the picture of a strong and resilient economy.
It is also notable that despite higher borrowing costs and the uncertainty caused by the recent government shutdown, the US economy not only did not buckle, but showed remarkable momentum. The rise in domestic consumption, especially from higher income households that benefited from the rally in financial markets, played a decisive role.
In other words, those expecting a recession will probably need to wait a little longer.
CONSUMER CONFIDENCE
However, this is where things start to get complicated. Because while macroeconomic data show strength, consumer sentiment tells a very different story.
Consumer confidence in the US, according to the latest Conference Board reading, fell to 89.1 points. This marks the fifth consecutive decline and remains below the level that signals recession for the eleventh straight month.
Similar findings come from the University of Michigan, where consumers express greater pessimism compared to last year, even though inflation shows signs of easing. Most expect unemployment to rise, while many households report struggling with higher energy and insurance costs.
What does this mean? It means people are worried. Expectations for unemployment are increasing. The cost of living is rising. And while wealthier households continue to spend thanks to the market rally, the middle class and lower income groups are under pressure.
And this is where the Fed’s big dilemma begins.
WHAT WILL THE FED DO
On one hand, we have strong GDP growth that justifies a tight monetary stance. On the other, we have anxious consumers and indicators pointing to a slowdown.
Add to this the fact that final inflation data show a small but steady decline. The PCE index, which the Fed closely monitors, now stands at 2.8%, while core PCE is at 2.9%. These figures are still above the 2% target, but clearly improved compared to previous quarters.
So what will the Fed do?
For now, nothing. It is waiting for more data. It wants to see how the labor market, inflation, and consumer confidence evolve. That is why the probability of an interest rate cut in January has been significantly reduced.
The policy rate remains at 3.5% to 3.75%, and it is most likely to stay there at least through the first quarter of 2026. Many analysts believe that only if economic fatigue is clearly confirmed will the Fed move toward easing.
Still, markets closed in the green yesterday. Investors seem to be reading the data calmly and appear to accept that the US economy, despite the ups and downs, remains resilient.
This rise suggests that there is still optimism, or at least confidence that there will not be a major deterioration. After all, equities continue to offer returns to long term investors, even in periods of uncertainty.
