Strong US growth and jobs data dampen January rate cut hopes

Highlights

U.S. economic growth in Q3 2025 was the fastest in two years.
The labor market remains resilient, with jobless claims near historic lows.
Strong economic and labor data reduced the probability of a Fed rate cut in late January to 5%.

Fresh data released on Thursday showed that the U.S. economy grew faster in the third quarter of 2025 than policymakers had expected, driven by stronger exports and a smaller drawdown in business inventories.

According to the Bureau of Economic Analysis, inflation-adjusted U.S. GDP grew at an annualized rate of 4.4%, marking the fastest pace in two years. This result exceeded the 3.8% growth recorded in the second quarter of 2025.

US real GDP growth data (Quarterly Percent Change)

2024:

Q2 2024: +3.5%
Q3 2024: +3.2%
Q4 2024: +1.8%

2025:

Q1 2025: -0.6% (contraction)
Q2 2025: +3.8%
Q3 2025: +4.4% (revised estimate)

Additional government data indicated that the number of people filing initial unemployment claims remained near historic lows.The core personal consumption expenditures price index, which excludes food and energy, was unchanged at 2.9% for the quarter.

Goods purchases, a key driver of overall economic activity, rose 3.5% on an annualized basis. As reported by Cryptopolitan, Americans spent on services at the fastest pace in three years and also accelerated purchases of physical goods compared with previous months.

Business investment increased 3.2%, largely due to continued spending on computer equipment amid concerns over potential Trump-era tariffs. Investment in data centers—facilities housing computers that power artificial intelligence systems—reached a record high.

Meanwhile, final sales to private domestic purchasers, a measure reflecting actual consumer and business demand, grew 2.9%, matching the previous quarter’s pace.

Labor market shows resilience

The U.S. labor market also remains resilient. Although initial jobless claims rose by 1,000 to 200,000 in the week ending January 17, according to the Labor Department, the figure came in below the 209,000 forecast.

Over the past three years, claims have fallen to 200,000 or lower only a handful of times, mostly during holiday weeks, signaling that companies are not conducting widespread layoffs. The four-week moving average of new claims, which smooths volatility, fell to 201,500 last week—the lowest level in two years. The largest declines were recorded in New York, Georgia, and Texas.

Stronger-than-expected economic growth combined with labor market stability makes a rate cut at the Federal Open Market Committee meeting on January 28 highly unlikely.

The CME FedWatch Tool currently assigns just a 5% probability to a rate cut, with a 95% chance that rates will remain in the 3.5%–3.75% range. This significantly reduces the likelihood of a rally in risk assets such as cryptocurrencies and technology stocks. As a result, the first FOMC meeting of 2026 is expected to pass without major surprises.

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