US Economy Rips 4.3%, Is the Jan Rate Cut Dead?

Jakarta, Gotrade News - The US economy just recorded its strongest expansion in two years, printing 4.3% annual growth for the third quarter.

The US Commerce Department report shows this figure blowing past economists' predictions, which had previously targeted growth at just the 3% level.

Key Takeaways

• US GDP grew 4.3% in Q3, driven by resilient consumer spending despite inflation.
• PCE inflation ticked up to 2.8%, triggering fears the Fed might scrap the January rate cut.
• The recovery is "K-shaped," favoring wealthy spenders and AI investments.

This upside was powered by consumer spending, which makes up about 70% of US economic activity, rising significantly compared to the previous quarter.

This strong spending sentiment is relevant for you if you're monitoring retail and consumer stocks like Amazon.

However, an economy running this "hot" brings a fresh dilemma for the Fed's interest rate policy ahead.

Data shows the Fed's preferred inflation gauge, the PCE, actually climbed to 2.8% last quarter.

This condition makes the odds of a January rate cut increasingly slim as inflation risks start peeking out again.

Chris Zaccarelli of Northlight Asset Management warns that inflation could return as the biggest threat to economic stability if growth keeps running this fast.

This phenomenon is also referred to as a "K-shaped" recovery, where spending is driven by the wealthy who are cashing in on capital market gains.

This is reflected in the performance of major stock market indices represented by the SPDR S&P 500 ETF Trust, which continues to hold strong.

Aside from household consumption, massive investment in the artificial intelligence (AI) sector was also a key pillar of this GDP jump.

Investment in intellectual property, which covers AI development, recorded positive growth, benefiting big players like Alphabet.

Reference:

• AP News, Resilient US consumers drive strongest economic expansion in 2 years. Accessed on December 24, 2025
• Featured Image: Shutterstock

Disclaimer

Gotrade is the trading name of Gotrade Securities Inc., registered with and supervised by the Labuan Financial Services Authority (LFSA). This content is for educational purposes only and does not constitute financial advice. Always do your own research (DYOR) before investing.