The US Bureau of Economic Analysis released its final estimate for the third quarter of 2025 on January 22, 2026, showing annualized real GDP growth revised up from 4.3% to 4.4%. At the same time, the annualized quarterly rate for core Personal Consumption Expenditures, or Core PCE, stayed at 2.9%. Markets reacted quickly, cutting back expectations for Federal Reserve rate cuts and pushing crypto prices lower.
Core PCE Holds at 2.9% While Inflation Pressure Edges Higher
Core PCE is the inflation gauge most closely watched by the Federal Reserve because it excludes short-term swings in food and energy prices. The final reading for the third quarter came in at 2.9%, matching both the prior estimate and market expectations. It was still above the second quarter reading of 2.6%, a rise of 0.3 percentage points.
The data suggests inflation has not broken far away from the Fed’s long-run 2% target, but demand in the economy remains firm. That combination matters. Growth is still running hot, while price pressure has not fully faded, leaving traders less willing to price in an early policy shift.
Fastest GDP Growth in Nearly Two Years
The 4.4% annualized GDP reading was stronger than the second quarter’s 3.8% pace and marked the fastest growth in nearly two years. According to the BEA, the expansion was driven by continued strength in consumer spending, higher exports, increased government spending, and upward revisions to investment data.
Those details point to a US economy that stayed on a solid expansion path in the second half of the year. Consumer activity remained strong, business conditions held up, and that has added to concern that the economy may not be cooling enough to justify quick monetary easing.
Fed Rate-Cut Bets Pull Back After the Release
Interest-rate expectations shifted after the report. CME FedWatch data showed markets were almost fully convinced the Fed would leave the federal benchmark rate unchanged this month, with the probability at 95%.
Expectations for later meetings also turned less dovish. The probability that the Fed would still avoid a rate cut in March, April, and June rose to 84.1%, 71.9%, and 41.5%. With growth accelerating and inflation showing a mild rebound, the central bank faces a tougher policy balance.
Bitcoin Falls to $89,650, Ether Drops Below $3,000
Crypto markets responded in real time. Bitcoin briefly fell below $90,000 to $89,650, while Ether dropped under $3,000 to $2,970.
The market logic was straightforward: stronger macro data reduced hopes for near-term rate cuts, putting short-term pressure on risk assets. The source material also noted that some market participants still see room for a rebound in crypto if the Fed’s policy stance turns looser again later on.