The U.S. economy continues to show solid growth despite high inflation, raising the likelihood of further interest rate hikes by the Federal Reserve. With inflation rates climbing again, the third-quarter GDP growth rate has reached its highest level in a year, providing indicators that support monetary tightening.
According to the International Financial Center, the Personal Consumption Expenditures (PCE) price index for September, released on the 29th (local time), rose 3.6% compared to the same month last year. This figure is 0.2 percentage points higher than the previous month’s rate of 3.4%. The month-over-month increase also expanded from 0.3% to 0.5%. Excluding the volatile food and energy sectors, the core PCE inflation rate rose 3.1% year-over-year, up from 3.0% the previous month.
Despite rising price pressures, the U.S. economy grew faster than expected. The GDP growth rate for the third quarter was an annualized 3.4%, up 1.2 percentage points from the second quarter's 2.2%. This figure exceeded market expectations of 3.2% and marked the highest level in a year. Strong consumer spending, despite high oil prices, and investments related to artificial intelligence (AI) contributed to this growth.
The labor market also showed positive signs. In the fourth week of October, new unemployment claims totaled 194,000, falling below market expectations of 199,000. With inflation, growth, and employment indicators all showing strength, expectations for a rate hike by the Fed in December are gaining momentum.
However, financial markets are focusing more on the burdens associated with prolonged high interest rates rather than the economic upswing. On this day, the S&P 500 index fell by 0.30%, and the yield on 10-year U.S. Treasury bonds decreased by 0.08 percentage points to 4.94%. As demand for safe assets increased, the dollar index also closed down 0.27% at 101.91.
Looking ahead, a key concern is whether high inflation will lead to a slowdown in consumer spending. Barclays has projected that as inflation pressures mount, the growth rate of consumer income may slow, potentially weakening future consumption and economic growth. For the Fed, making policy decisions will likely become more challenging as it navigates between inflation stability and the risk of economic slowdown.
* This article has been translated by AI.
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