Introduction to US Economic Trends
The recent interest rate cut announced by the US central bank, Federal Reserve, has sparked recession rumors. Renowned economists from finance management firms such as Moody’s and Aletheia Capital have spoken about the possibility of a recession in America. To understand the state of the US economy, it’s essential to decode the speech of Fed Chair Jerome Powell.
Current State of the US Economy
According to Powell, there are chances of a rise in unemployment in America. The economy and job creation have slowed down, and the unemployment rate, although low, has increased slightly in August 2025. These statements were made keeping in mind US President Donald Trump’s tariff and immigration policies.
GDP Growth Rate
The US GDP grew only 1.5% in the first half of 2025, compared to 2.5% in the same period last year. The FOMC projected a growth rate of 1.6% in 2025. However, the committee has forecasted a rise in GDP growth rate in subsequent years, with 1.8% and 1.9% growth expected in 2026 and 2027, respectively.
Consumer Spending
Powell’s speech also indicated that there was sluggishness in economic activity, with consumer spending slowing down. However, not all indicators point to a gloomy economy.
Positive Trends in the US Economy
The FOMC has projected America’s economy to grow at a rate of 1.6% in 2025, with higher GDP growth expected in 2026 and 2027. Despite the impact of Trump tariffs, the rate-setting panel revised upwards the growth projections. This means the committee doesn’t think America’s GDP would fall in the next two years due to the tariffs. In fact, the FOMC believes that both inflation and unemployment rates would decrease in the next two years, despite the hike in import duties.
Inflation Trends
The economic projections made by the committee revealed that US inflation would increase from current levels and would be elevated towards the end of the current calendar year. However, the annual rise in growth rate of prices would start to taper down from next year onwards. The US central bank would not be able to achieve its inflation target in the next two years, with a target of 2% for the annual rise rate of prices of goods and services.
Historical Inflation Trends
US inflation has continuously fallen after 2022 but has started to increase again due to ‘Trump Tariffs’. In July, the inflation figures rose to 2.6% from 2.5% in the same month last year. Recently, it has begun to rise from May 2025.
US GDP and Unemployment Rate Trends
The US GDP rose to 3.3% in Q2 CY25 from 3.0% in the same quarter last year. The unemployment rate has constantly increased since July 2025, with a current rate of 4.3% in August 2025.
Conclusion
In conclusion, while there are concerns about a potential recession in the US, the FOMC’s projections indicate that the economy is expected to grow in the next two years, despite the impact of Trump tariffs. The inflation rate is expected to increase in the short term but will taper down in the next two years. The unemployment rate, although increasing, is still relatively low. Overall, the US economy is expected to experience a slowdown, but a recession is not inevitable.
