US Economy Grows At A Faster Pace Than Anticipated; Hopes Of Rate Cut Rise

The United States has the largest economy and is arguably the most powerful country in the world. This fact appears to have been underscored by the way the country's economy has performed in the past few quarters. Adding to this momentum, the world's biggest economy's latest growth rate has surpassed expectations.

According to reports, the United States Gross Domestic Product or GDP, grew at a rate of 2.8 per cent in the previous quarter (at an annualised rate).

US GDP Grows Faster Than Expected

This is greater than many analysts's expectations of the largely de-industrialised country that has been looking to re-industrialise itself.

This happens at a time when the US counterparts across the Atlantic, in Europe, continue to be mired in a slowdown.

This 'good news' gets even brighter when the data is compared to the growth rate achieved in the first quarter of 2024 when the country grew at 1.4 per cent. This therefore marked a doubling of the country's growth rate.

This new development is attributed to a tangible increase in the nation's consumer spending. Consumer spending and its growth are essential, given the US's orientation as a consumption-driven economy. In addition, an uptick in business investment has also aided the economy.

Another development is the declining inflation rate in the country, which hit unexpectedly high levels in the first quarter of 2024. The inflation rate for the month of June dropped to 3 per cent, from the previous month's 3.1 per cent.

Rate Cut On Horizon?

These developments cumulatively are fostering the hope of an imminent rate cut come September.

Previously, the US Federal Reserve, while retaining the interest rate of 5.25-5.50 per cent, had signalled a possible rate cut, potentially in the second half of 2024.

The wavering inflation rate had been an Achilles heel for the economy and the Fed. If the inflation rate stabilises further, and reaches closer to the the central banking system's 2 per cent target, then the much-awaited rate cuts might finally come to pass.

In an election year (US Presidential Election 2024), this development may have come at the right time for some in US politics. This could possibly favour the ruling Biden administration.