US economic growth slowed in the final quarter of last year but continued to expand at a solid pace, supported by consumer spending, which is expected to keep the Federal Reserve from cutting interest rates in the near future, News.az reports citing The National.
Gross domestic product, which measures economic activity, grew by 2.3 per cent in the months from October to December, the Commerce Department reported. GDP growth was measured at 3.1 per cent in the third quarter.GDP grew by 2.8 per cent for 2024 overall, in line with the most recent projections. Fourth-quarter GDP growth was driven by consumer spending, which accounts for roughly two thirds of economic activity. Strong consumer spending came as the Fed reduced its benchmark interest rate target range by 100 basis points in the final three months of the year.
Stronger economic growth also means the Fed is likely on track to hold interest rates for at least the next few months.
Thursday's report comes a day after the US central bank left its target range unchanged at 4.25 to 4.5 per cent.
“With our policy stance significantly less restrictive than it had been, and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” Fed chairman Jerome Powell said, indicating the US central bank is content to keep rates steady for now.
Mr Powell also suggested the Federal Open Market Committee is not considering a rate cut in March.
“The broad sense of the committee … is that we don’t need to be in a hurry to adjust our policy stance,” he told reporters on Wednesday.
The Fed chairman said he is looking for “real progress” before reducing policy again and that the central bank does not want to see further weakening in the labour market.
What this progress looks like, he said, are “serial readings” that suggest inflation is moving back down to the Fed's 2 per cent target.
Traders anticipate the Fed will not cut rates again until June, according to CME Group data.
Progress in taming inflation stalled towards the end of 2024, but a softer-than-expected reading earlier this month lifted hopes that it could be moving down again.
The Fed's preferred inflation metric – the Personal Consumption Expenditures Price Index – rose at a 2.3 per cent annualised pace in the fourth quarter. Core PCE inflation, which strips food and energy, rose 2.5 per cent.
PCE inflation data for December is due to be released on Friday. Economists expect PCE inflation to have risen 0.3 per cent on a monthly basis in December and 2.6 per cent year-on-year, according to a FactSet estimate.
