The year draws to a close on a positive note for the US economy, showcasing a decline in inflation, an upsurge in the job market, robust consumer spending, and promising prospects in the housing sector. Adding to the cheer, speculations arise about the Federal Reserve considering interest rate drops in the coming year, amplifying the Democrats' optimism as they anticipate retaining power for President Joe Biden's next term.
Wall Street began its celebrations early, igniting the question: will this buoyant momentum persist through the week?
"Closing out 2023, it's evident the economy not only sidestepped an anticipated recession but thrived," shared Moody's Analytics Chief Economist Mark Zandi on social media, reflecting the overall sentiment.
Following the Federal Reserve's indication that it's concluded with interest rate hikes, the markets eagerly embraced the holiday spirit.
Last year's soaring 9.1% inflation—a 41-year high—prompted the Fed's consecutive interest rate hikes over 52 weeks, aiming to curb inflation to a targeted 2%. Although it now stabilizes at 2.7%, the Fed has ruled out further cuts, paving the way for potential rate reductions in the New Year, banking on a promising array of upcoming US government reports, media outlets report.
Inflation expectations have considerably dipped from 4.5% a month earlier to the current 2.7%, marking the lowest since March 2021. Concurrently, gasoline prices have eased, nearing or dropping below $3 per gallon across many states, while income sustains its stability with wages outpacing inflation rates.
This financial landscape sets the stage for what media reports anticipate to be a respectable holiday shopping season, empowering consumers with adequate purchasing power.
The economy's resilience shines through as real GDP tracks a robust 2.5% growth trajectory, with unemployment persisting below 4%, and inflation swiftly receding, as emphasized by Mark Zandi of Moody's Analytics.
Federal Reserve Chair Powell refrained from committing to rate cuts but upgraded economic and inflation forecasts for the upcoming years. Notably, fourth-quarter gross domestic product saw an upward revision to 2.6% annual growth from the previously estimated 2.1%, while a 1.4% economic growth projection stands for 2024.
(With Agency Inputs)
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