Rapid Economic Growth in the US in Q2 2024
The pace of economic growth in the United States was faster in the second quarter of 2024 than analysts had anticipated, and inflation has decreased, increasing expectations for a reduction in interest rates in September by the US Federal Reserve (Fed), Reuters reports.
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According to data released Thursday by the US Department of Commerce, the world’s largest economy recorded an annual growth of 2.8% in the April-June 2024 period, following an expansion of 1.4% in the first quarter of 2024. Economists had expected a 1.9% GDP growth in the US in the second quarter of 2024, as reported by Agerpres.
The pace of US economic growth was supported by the strength of the labor market and the increase in inventories.
The Economic Outlook for the Second Semester
As we enter the second semester of the year, the economic landscape is still uncertain. The labor market is slowing down, affecting wage growth, while the savings rate remains below pre-pandemic levels. Economists anticipate the effects of interest rate hikes to be felt, with slow growth in central and local government revenues potentially impacting consumer spending. Despite these challenges, analysts do not foresee a recession, especially with expected interest rate cuts in September.
BNR Cautious on Interest Rate Cuts
The National Bank of Romania has expressed caution regarding interest rate cuts, citing decreasing inflation rates but significant risks in the fiscal sector and wage pressures. The Romanian leu remains vulnerable in this volatile economic environment.
Fed Chair Powell’s Optimistic Outlook
Meanwhile, Federal Reserve Chair Jerome Powell recently testified before the US Senate, expressing confidence in the economy. He stated that positive data trends signal a decrease in inflation towards the Fed’s target of 2%, with modest progress in recent economic indicators.
The Risk of Low Interest Rates
An official has warned that a too low or too late decrease in interest rates could jeopardize the economy and the labor market. “High inflation is not the only risk we face. A too low or too late decrease in interest rates could impact the economy and the labor market. Additionally, reducing interest rates too soon or too much could slow down the decline in inflation or even reverse progress in this area,” Powell stated.
Traders estimate a probability of over 70% for the Fed to lower interest rates in September and likely in December. According to data published last month by the US Department of Commerce, the annual inflation rate in May stood at 2.6%, compared to 2.7% the previous month, in line with analysts’ predictions. However, there is still a risk of inflation remaining high if interest rates are lowered too aggressively.
The Federal Reserve Considers Monetary Policy Changes
In June, the unemployment rate in the United States slightly increased to 4.1%, while the number of jobs created by American employers was lower than in May. This situation raises the chances for a monetary policy relaxation decision from the Federal Reserve. Powell stated that the labor market is “strong, but not overheated,” and that the Fed’s restrictive policy helps balance supply and demand.
Fed Officials Maintain Interest Rates
During the latest monetary policy meeting, Federal Reserve officials unanimously decided to keep the interest rate within a range of 5.25% to 5.50%, in line with analysts’ estimates. This is the highest level in the last 22 years. The Federal Reserve uses unemployment and inflation data to determine if the economy is slowing down and is ready for an interest rate cut.
The benefits of digital currency
Digital currency has revolutionized the way we think about money and transactions. With the rise of cryptocurrencies such as Bitcoin and Ethereum, more and more people are turning to digital currency as a secure and efficient way to conduct financial transactions.
One of the main advantages of digital currency is that it offers a high level of security. Transactions are encrypted and decentralized, meaning that they cannot be easily tampered with or hacked. This provides peace of mind for both consumers and businesses, knowing that their money is safe and secure.
Another benefit of digital currency is the speed of transactions. With traditional banking systems, it can take days for a transaction to be processed. However, with digital currency, transactions can be completed in a matter of minutes, making it ideal for fast-paced industries such as e-commerce.
Furthermore, digital currency is borderless and can be used for international transactions without the need for currency conversion fees. This makes it a cost-effective option for businesses with global operations or individuals who frequently transfer money across borders.
In conclusion, digital currency offers a range of benefits including increased security, fast transactions, and cost-effectiveness. As the world becomes more digitalized, the adoption of digital currency is likely to continue to grow, transforming the way we think about and use money.