|

GDP bottom line: Unlikely to impact the Fed upcoming decisions

Consumers have been a driving force behind the American economy, leading to its most robust pace of growth since early 2021. In the third quarter, the economy expanded seasonally, and the inflation-adjusted annual rate was 4.9%. This growth rate exceeded the expectations of economists, who estimated GDP to grow at 4.7% for the same period, more than double the pace seen in the second quarter, which was at 2.1%.

Of course, markets are a forward-looking machine where it's expected the economy's resilience may face challenges soon. Factors like rising long-term interest rates, conflicts in Ukraine and the Middle East, and the potential for a partial U.S. government shutdown could test the strength of the economy.

The print was also lower than the Atlanta FED GDPNOW of 5.3 % and is unlikely to significantly impact the Federal Reserve's upcoming decisions.

GDP figures are backward-looking compared to more timely monthly data, such as inflation and employment numbers.

The consensus expectation is that the Fed will keep interest rates unchanged at their current 22-year high. This decision allows policymakers more time to assess the impact of their previous rate hikes and recent events, such as the sharp bond market sell-off.

However, the GDP data serve as a reminder of the underlying strength of the U.S. economy and support the expectation that interest rates will remain elevated for an extended period. This is particularly relevant for longer-dated 10- and 30-year Treasuries, which have experienced significant sell-offs in recent weeks and should remain particularly sensitive to future growth expectations.

Author

Stephen Innes

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

More from Stephen Innes
Share:

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

By subscribing you agree to our Terms and conditions.

Editor's Picks

EUR/USD rebounds after falling toward 1.1700

EUR/USD gains traction and trades above 1.1730 in the American session, looking to end the week virtually unchanged. The bullish opening in Wall Street makes it difficult for the US Dollar to preserve its recovery momentum and helps the pair rebound heading into the weekend.

GBP/USD steadies below 1.3400 as traders assess BoE policy outlook

Following Thursday's volatile session, GBP/USD moves sideways below 1.3400 on Friday. Investors reassess the Bank of England's policy oıtlook after the MPC decided to cut the interest rate by 25 bps by a slim margin. Meanwhile, the improving risk mood helps the pair hold its ground.

Gold stays below $4,350, looks to post small weekly gains

Gold struggles to gather recovery momentum and stays below $4,350 in the second half of the day on Friday, as the benchmark 10-year US Treasury bond yield edges higher. Nevertheless, the precious metal remains on track to end the week with modest gains as markets gear up for the holiday season.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid bearish market conditions

Bitcoin (BTC) is edging higher, trading above $88,000 at the time of writing on Monday. Altcoins, including Ethereum (ETH) and Ripple (XRP), are following in BTC’s footsteps, experiencing relief rebounds following a volatile week.

How much can one month of soft inflation change the Fed’s mind?

One month of softer inflation data is rarely enough to shift Federal Reserve policy on its own, but in a market highly sensitive to every data point, even a single reading can reshape expectations. November’s inflation report offered a welcome sign of cooling price pressures. 

XRP rebounds amid ETF inflows and declining retail demand demand

XRP rebounds as bulls target a short-term breakout above $2.00 on Friday. XRP ETFs record the highest inflow since December 8, signaling growing institutional appetite.