A Look Into The Markets - Sept 26, 2025

by Geri And Tim Penner

On the heels of the Fed's recent rate cut, interest rates moved higher. Let's explore why this happened and what to expect in the busy week ahead.

"Good times, bad times, you know I've had my share."
- Good Times Bad Times, Led Zeppelin

The U.S. economy remains resilient

The second-quarter GDP report showed the economy grew faster than expected, signaling growth is holding up despite higher interest rates. Strong GDP means businesses are producing more, consumers are still spending, and overall economic health remains solid.

What It Means for Rates & Clients:

A stronger economy can keep upward pressure on interest rates.
If growth stays hot, the Fed may feel less urgency to cut rates.
Signs of cooling in areas like the labor market could still shift the outlook.

The Takeaway: The first half of 2025 was healthy, but the path forward depends on whether growth slows enough to keep inflation moving lower. That will also shape how quickly the Fed cuts rates going forward.

Consumers are durable

Durable Goods Orders: Big-ticket purchases like cars, appliances, and machinery, jumped 2.9% in August. Markets were expecting a decline.

This strength shows businesses and consumers are still confident enough to invest in large purchases. While that's good news for the economy, it also signals ongoing demand that could keep inflation sticky; making the Fed cautious about cutting rates too soon.

Fed inflation target to change?

Fed officials Michelle Bowman, Raphael Bostic, and Stephen Miran floated the idea of shifting from a strict 2% inflation target to a target range, like many other central banks use globally.

Before 2012, the Fed didn't have an official inflation target, instead aiming for "low and stable prices." Any change now would come gradually and only after inflation moves closer to today's 2% goal.