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The US economy grew at a 2.8 per cent annualised rate in the second quarter, in a sign of consumer resilience as the Federal Reserve considers cutting interest rates in the coming months.
Thursday’s data from the Bureau of Economic Analysis surpassed economists’ expectation of 2 per cent GDP growth between April and June and compares with a 1.4 per cent expansion in the first quarter.
The Fed is weighing when to cut rates after raising them to a 23-year high of 5.25-5.5 per cent in response to the inflation shock from the pandemic.
Recent data suggests the central bank is succeeding in its battle to tame price pressures. According to June’s consumer price index report, US inflation is now hovering around 3 per cent.
The personal consumption expenditures measure, used for the Fed’s 2 per cent target, was 2.6 per cent in May.
Figures from earlier this month also suggested that the labour market has started to soften, further bolstering the case for an imminent rate cut.
Officials have already begun laying the groundwork for a rate pivot soon. Fed chair Jay Powell said last week that the last three monthly inflation figures marked a “pretty good pace” of price growth.
The US economy has so far been able to avoid the recession that has been predicted by many economists. The Fed maintains that there is still a path to a “soft landing”, whereby inflation comes back down to target without triggering a surge in job losses.
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