United States
Why this matters
Section titled “Why this matters”The US produces about a quarter of the world’s output: $30.8 trillion of the world’s $118 trillion in 2025 (World Bank). The dollar is by far the main currency used to price world trade (Federal Reserve), so when US interest rates move, money moves everywhere. For a macro investor, the US is the economy you watch first.
This page and the next four look at the five biggest economies the same way: what drives each one, who sets its interest rates, the numbers, and one episode that shaped it.
What drives it
Section titled “What drives it”The US is consumer-led. Household spending makes up about 68% of GDP, the highest share of the five (World Bank). That’s why US retail sales, jobs and wages matter so much: when American households feel confident and employed, they spend, and the whole economy grows.
The indicator to watch
Section titled “The indicator to watch”Core PCE inflation, together with jobs data. The Fed’s 2% target is defined with PCE (Federal Reserve). Officials look closely at the core version, which leaves out food and energy because those prices swing so much. Core has historically been a better guide to where total inflation is heading (Federal Reserve). The other half of the mandate is tracked with the unemployment rate.
US: PCE inflation vs the Fed's 2% goal
Hover for values. The 2% goal is measured with total PCE; core PCE leaves out food and energy.
Data as of 2026-07-01 · Source: Bureau of Economic Analysis via FRED (year-over-year change)How the Federal Reserve operates
Section titled “How the Federal Reserve operates”The Federal Reserve (the Fed) is the US central bank. Congress gave it two goals, known as the dual mandate: maximum employment and stable prices (Federal Reserve).
| Decision body | The Federal Open Market Committee (FOMC): 12 voting members, meeting eight times a year (Federal Reserve) |
| Policy rate | The federal funds rate: the rate banks charge each other for overnight loans. The FOMC sets a target for it (Federal Reserve) |
| Other tools | Interest paid on banks’ reserves, overnight reverse repos, the discount window and buying or selling securities (Federal Reserve) |
In short: the FOMC votes on the target for the federal funds rate, and the Fed uses its other tools to push the market rate toward it.
The numbers
Section titled “The numbers”United States: growth, inflation and jobs since 1990
Yearly figures. Hover for values.
Data as of 2025 · Source: World Bank (unemployment is an ILO modelled estimate)Growth dipped below zero only three times since 1990, and two of those dips were deep: 2009 (the financial crisis) and 2020 (COVID). Inflation mostly stayed between 1% and 4%, until it jumped to 8% in 2022.
Real-world example: the 2008 financial crisis
Section titled “Real-world example: the 2008 financial crisis”A boom in risky mortgages ended with house prices falling and banks failing. The US was in recession from December 2007 to June 2009 (NBER). The economy shrank by 2.6% in 2009 (see the chart), and unemployment peaked at 10% in October 2009 (FRED).
The Fed cut its main interest rate to between 0% and 0.25% in December 2008, as low as it could go (Federal Reserve). It stayed there for seven years, until December 2015 (Federal Reserve). The chapter Money, banks & credit explains how the credit boom got so big.
Key takeaways
Section titled “Key takeaways”- The US is the largest economy and runs on household spending (about 68% of GDP).
- The Fed has two goals, maximum employment and 2% inflation, and its decisions ripple around the world.
- The 2008 crisis shows how a credit bust can turn into a deep recession.