The pace of U.S. economic expansion tapered off in the fourth quarter as GDP rose by an annualized 2.3%, following a 3.1% surge in the prior quarter, according to preliminary data from the Commerce Department.
Despite the moderation, resilient domestic demand is expected to guide the Federal Reserve towards a gradual path of interest rate reductions this year.
The American economy grew at a pace exceeding the 1.8% threshold that is deemed non-inflationary by policymakers, countering earlier fears of a recession sparked by significant rate hikes over the past two years. Despite the latest figures underperforming economists’ forecasts of 2.6% growth, the U.S. maintains a robust economic foundation.
Recent statistics revealing a record-high goods trade deficit in December led the Atlanta Federal Reserve to revise its GDP forecast sharply down to 2.3% from 3.2%. Nonetheless, the Federal Reserve, which kept its interest rate steady in the 4.25%-4.50% band on Wednesday, signaled a cautious stance, omitting prior credits to progress on inflation targets.
Fed Chair Jerome Powell asserted the economy’s overall strength and indicated only two rate cuts for the year, scaled back from the four predicted earlier, as the central bank evaluates economic conditions.
