Fresh U.S. economic data is testing Federal Reserve Chair Warsh’s recent view that the economy is not overheating, while markets continue to price in a December rate hike. Data released by the U.S. Commerce Department showed real gross domestic product grew at an annualized quarter-over-quarter rate of 3.4% in the third quarter, above market expectations. Consumer spending increased 3.8% over the same period, and business equipment investment jumped 20.9%.
The figures point to stronger-than-expected growth driven by resilient consumption and corporate investment. At the same time, inflation continues to spread, leaving the Federal Reserve with a harder policy trade-off between sustaining growth and containing prices. One day before the data release, Warsh said he did not believe the U.S. economy was running too hot and that he did not want overly tight monetary policy to hinder the expansion. The latest numbers, however, suggest economic activity has yet to show a clear slowdown even as markets expect the Fed to keep raising rates.
Fresh U.S. economic data is challenging Federal Reserve Chair Warsh’s view that the economy is not overheating, with markets still betting on a December rate hike and the central bank facing a more complicated policy choice.
According to data released by the U.S. Commerce Department and cited by ChainCatcher, real gross domestic product expanded at an annualized quarter-over-quarter rate of 3.4% in the third quarter, beating market expectations. Consumer spending rose 3.8% during the same period, while business equipment investment climbed 20.9%.
Strong consumption and corporate investment pushed growth above expectations. Inflation, meanwhile, continues to spread, leaving the Federal Reserve with a tougher balance between supporting growth and controlling prices.
One day before the data was released, Warsh said he did not believe the U.S. economy was running too hot and that he did not want overly tight monetary policy to obstruct the expansion. The latest figures suggest that even as markets expect the Fed to continue raising rates, U.S. economic activity has not shown a clear slowdown.
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