The U.S. economy grew at a rate of 2.8% in the second quarter of 2024, according to gross domestic product (GDP) statistics released by the Bureau of Economic Analysis (BEA) on Thursday.
Higher growth in the second quarter follows poor growth in the first quarter of 2024, which measured 1.4% after being revised down from an initial estimate of 1.6%, according to the BEA. Economists expected that GDP would increase by around 2.1% in the second quarter of 2024, in line with typical U.S economic growth rates.
The Federal Reserve has attempted to slow down the economy by keeping the federal funds target range between 5.25% and 5.50%, the highest level since 2001. The June Federal Open Market Committee (FMOC) meeting marked the seventh in a row where the Fed chose not to adjust the rate, leaving borrowing costs elevated for consumers and businesses.
The Fed has set the federal funds rate to its current level to combat elevated inflation, which measured 3.0% on an annual basis in June despite falling 0.1% month-over-month, far higher than the Fed’s target of 2%. The rate of inflation excluding the categories of energy and food remained higher in the month, increasing 3.3% year-over-year in June, compared to 3.4% in May.
Sticky inflation could make it harder for the Fed to justify a rate cut, which would reduce borrowing costs and promote economic growth. A majority of investors now expect a 0.25% rate cut at the Fed’s September meeting as the economy slows, according to CME Group’s FedWatch Tool.
The unemployment rate ticked up slightly to 4.1% in June as the U.S. economy added 206,000 nonfarm payroll jobs, with the largest share of growth being in the government, which added 70,000 new positions. In testimony to Congress on Tuesday, Fed Chair Jerome Powell noted that the job market appeared to be cooling, raising hopes further that a rate cut could be on the horizon, according to Reuters.
The 2.8% figure is an advanced estimate and will be updated as additional data becomes available, according to the BEA.
Featured image credit: (Official White House Photo by Cameron Smith)
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