The U.S. economy closed the second quarter with a final GDP growth rate of 3.8% — its strongest performance since the third quarter of 2023 and above the long-term average pace.
That’s a sharp rebound from the 0.5% contraction in the first quarter, when fears over looming tariffs rattled businesses. Still, the acceleration in growth stands somewhat at odds with the softer labor market data seen over the summer.
Speaking in Rhode Island, Federal Reserve Chair Jerome Powell said that signs of labor market weakness had pushed policymakers to shift their balance of risks in a way that justified a rate cut last week.
On inflation, Powell noted that the impact of tariffs has so far remained at the lower end of expectations and could prove temporary. He emphasized that there is no preset path for future rate decisions, underscoring the Fed’s challenge of balancing persistent inflation …