Strong GDP growth brings joy to President Biden, but what to expect from the Fed?🗓️🪄
New economic data suggests that the US economy is growing faster than predicted, which is great for theWhite House ahead of the upcoming election. GDP estimate for the quarter beat expectations and the economy appears to be maintaining robust growth.
However, this victory may complicate decision making of the Federal Reserve (Fed). Their original forecast of three interest rate cuts this year is now not at all clear. However, market expectations for a cut as early as March are facing resistance from Fedwhich stresses the need for more data to make a final decision.
The economy's above-expectations growth could strengthen the case for delaying cuts until March. According to the chief economist Ryan Sweet z Oxford Economics market expectations may be premature given the recent positive economic performance.
However, there is also good news on inflation, with theFed'spreferred indicator reaching 2% growth rates. This is the second quarter in a row that the growth rate has been 2% of the central bank's plan. This may give the Fed more flexibility in deciding whether to cut rates.
On the other hand, skeptics, such as David Doyle of Macquarie Group, point out that an immediate cut is not certain. We need more evidence that inflation is heading back to 2% target on an annual basis.
How do you see the current developments in the US economy? Do you think markets will reach new ATHs after the rate cut, which they are already exceeding thanks to the promising outlook and AI-backed growth 🚀💸 ?