U.S. Growth Accelerates as Inflation Remains Elevated

U.S. GDP grew at a 3.4% annualized rate in the third quarter, its strongest pace in a year, with business investment up 12.7%—much of it tied to AI—and consumer spending up 3.8%; the advance estimate is subject to revision. Despite strong headline growth, consumer sentiment and household budgets were under pressure: September spending rose 0.5% in dollar terms but barely increased after inflation, while real disposable income fell. September PCE inflation was 3.6% year over year and core inflation was 3.1%, both above the Federal Reserve’s 2% target, with energy costs, geopolitical conflict and tariffs cited as sources of persistent price pressure. The Fed held its benchmark rate at 3.75%–4% with two dissenting votes, while markets continued to consider a possible December rate increase. The European Central Bank also held rates steady and warned that a prolonged energy shock could raise inflation and weaken growth.