SEPTEMBER 29, 2025 – – AUGUST DATA SOLID, RATES STILL EXPECTED TO COME DOWN
With inflation still well above the targeted 2 percent; the PCE reported at 2.7 percent for the 12-months ending in August; it is still likely rates will move down at least once more this year. The economy is holding its own despite the tariffs, which are expected to be consistent with a one-time price increase. The Fed’s main concern is the slowdown in hiring in the last 3 months, though the unemployment rate remains at historically low levels.
Consumer spending was solid in August with 0.6 percent growth after a 0.5 percent increase in July. The US economy has kept up the momentum experienced in Q2, but economists expect spending will slow as the labor market softens as the effects of the tariffs keep working their way through the economy. Estimates are now for 3.9 percent growth in GDP for Q3, up from an initial estimate of 3.3 percent in July.
Investors are betting, with a 85.5 percent likelihood that interest rates will move down by a quarter-point next month. The Fed is scheduled to meet next October 28-29.