U.S. GDP Report Clears Path for Two More Fed Rate Hikes
The economy is expanding faster than policy makers expected.
Fed Chairman Jerome Powell was right about the economy being strong.
Photographer: Andrew Harrer/Bloomberg
The U.S. gross domestic product report for the second quarter will almost certainly cement the case for a September interest-rate increase by the Federal Reserve and keep a December hike in play even though there will be a tendency to dismiss the results due to a burst of soybean exports ahead of retaliatory tariffs imposed by China.
What’s important is that the 4.1 percent rate of growth in the April through June period yields a 2.9 percent average for the past four quarters, a number that likely better represents the underlying pace of economic expansion than quarterly readings. It is also well in excess of the median Fed policy maker estimate of the potential growth rate, which is 1.8 percent, but close to the central bank’s 2018 growth forecast of 2.8 percent.