US economy grew faster than predicted but borrowing costs see GDP slide on previous quarter

US economic growth rose by 2.9 per cent during the last three months of 2022,.

Although US GDP beat estimates of 2.6 per cent the rise compares unfavourably with a 3.2 per cent jump registered in the third quarter of 2022.

Richard Flynn, managing director at Charles Schwab UK, said: “Today’s figures exceed expectations for growth in the fourth quarter. For almost a year, the Federal Reserve has been trying to achieve a soft landing by raising short-term interest rates just-enough to bring down inflation without causing a recession. It’s clear the economy remains relatively strong in the face of the Fed’s efforts, suggesting they’re succeeding.

“However, investors may fear that today’s figures are somewhat deceiving as other recent data has pointed towards a recession. Whilst Fed officials have signalled they plan to “hike and hold” rates at high levels to ensure inflation recedes, the market seems doubtful. In fact, investors are already pricing-in cuts to the federal funds rate target in the second half of 2023. This mismatch in expectations may drive volatility in the months ahead.”

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