The United States economy expanded at an annualized rate of 3.4 percent in the three months ending in September, according to preliminary government data released Thursday, days before the midterm elections.1,4,6
The third-quarter figure amounted to an acceleration from 2.2 percent annualized growth in the previous quarter, Commerce Department data showed, and outpaced the 2.5 percent annualized rate recorded over the first three months of this year.4,6
The increase was linked in part to consumers who kept spending despite persistent inflation and to a continued surge in investment in artificial intelligence. The country's gross domestic product increased at an annual rate of 3.4 percent from July through September, preliminary data from the Bureau of Economic Analysis showed. Many of the nation's largest companies have poured funds into the chips and data centers necessary to operate AI, a surge in spending that has helped boost the economy in recent quarters.4,6,7,8
At the same time, price increases have remained above the Federal Reserve's target. Prices increased 3.7 percent in September compared with a year earlier, putting the inflation rate more than a percentage point above the Fed's target level of 2 percent.3,4
In response to rising prices, a key long-term Treasury rate has jumped in recent months as investors feared price increases would eat away at their returns. The rise in bond yields has pushed up rates for loans like credit cards and mortgages, threatening to worsen the financial crunch for borrowers. Still, hiring has continued to grow, albeit at a slower pace, while unemployment has stayed at a low level by historical standards.4
Speaking at a press conference in Washington, D.C., on Wednesday, Fed Chair Kevin Warsh voiced optimism about U.S. economic performance, even as he acknowledged the challenge posed by elevated inflation. "Economic activity is expanding at a strong pace. While uncertainty remains, owing in part to geopolitical developments, domestic spending has been resilient," Warsh said.4
An acceleration of price increases this year has posed a challenge for Fed officials tasked with containing inflation. The central bank raised interest rates a quarter of a percentage point last month in an effort to battle back price woes, the first rate increase in three years. On Wednesday, the Fed opted to leave rates unchanged as they await further economic data.4
Policymakers may lose patience as they weigh whether the current level of interest rates is high enough to ease price hikes. The odds of a quarter-point rate hike at the Fed's next meeting in December are pegged at about 85 percent, according to CME Group's FedWatch Tool, a measure of market sentiment.4
Another potential rate increase would mean pressing the brakes harder on the economy, in turn risking sluggish growth and risk slowing the job market further. Since Warsh took the helm of the Fed in May, he has repeatedly vowed to dial back inflation.4
The third-quarter estimate is preliminary government data.4,6
"It's our responsibility to get inflation down," Warsh said on Wednesday.4
