A new GDP report Thursday and the expectation of a reading of sticky inflation on Friday should strengthen the new waiting approach for the federal reserve on interest rates.
The president of the Fed, Jay Powell, described this approach on Wednesday after the central bank decided to keep the rates pending, his first break after three consecutive cups at the end of 2024.
The decision -makers adopt a more cautious position while they assess several unknowns on the economic policies of the new Trump administration.
“With our political position much less restrictive than it had been and the remaining economy, we do not need to be in a hurry to adjust our political position,” Powell said on Wednesday.
The fourth quarter GDP report published Thursday provided evidence that the American economy closed an surprisingly solid year in 2024.
Although the title number is softer than expected, showing that the economy increased at an annualized rate of 2.3%, a more in -depth examination of the report showed positive signs on the health of the American consumer, according to experts .
“The courage of the report was in fact very strong,” the American economist at Deutsche Bank told Yahoo Finance Matt Luzzetti, showing growth in higher than expected consumption expenses of 4.2%.
What was more volatile was the commercial component of GDP. Imports and exports dropped 0.8% annualized and the accumulation of slower inventory has subtracted 0.9% points from the overall GDP growth.
Luzzetti postulates that volatility can be due to the anticipation of new prices of the Trump administration, as retailers can have scrambled to obtain themselves before any new function.
Equipment investment decreased by 7.8%, but this weakness was mainly concentrated in aerospace, which could have resulted from a strike in Boeing during the fourth quarter. These figures could bounce back in the first quarter of 2025.
“The American consumer was unstoppable, supported by the creation of wealth, a solid labor market and loans,” said Ellen Zentner, chief economic strategist of Morgan Stanley Wealth Management.
Inflation, however, remains a concern for Fed decision-makers, she added, with readings always higher than the 2% target of the Fed.
It is “still a little too high for the taste of the Fed and the bar of the bar to a drop in March increases,” she added, referring to the next meeting of the central bank from 18 to March 19.
A new inflation report scheduled for Friday from the personal consumption expenditure index (PCE), the Fed favorite gauge may not do much to mitigate these concerns.
Economists expect the annual “Core” PCE succeeded at 2.8% in December, unchanged from November. During the previous month, economists project the “Core” PCE increased by 0.2%, faster than the 0.1% observed in November.
