Overview

• The Commerce Department’s final estimate put second-quarter GDP at a 3.8% annualized pace, with consumer spending revised up to 2.5% and imports slowing, narrowing the trade deficit.
• Markets recalibrated on the news as the dollar held gains, short‑maturity Treasury yields hit three‑week highs, and U.S. equities fell for a third session.
• FedWatch pricing now leans toward, but is less certain of, a 25bp cut in October at roughly 88% odds, down from about 90%–92% before the data, with fewer total cuts projected for 2025.
• Federal Reserve officials struck a cautious tone, with Chair Jerome Powell warning that easing too aggressively could leave the inflation fight unfinished, while others highlighted cooling hiring.
• Economists flagged tariff‑related ‘trade whiplash’—Q1 import front‑loading followed by a Q2 pullback—complicating the signal from headline growth as investors look to Friday’s PCE inflation report and the next payrolls data.