US economy sees solid Q4 growth

Could the Fed continue to hold rates steady throughout 2025?

US economy sees solid Q4 growth

The US economy continued to see a solid pace of expansion at the end of last year despite slowing more than analysts had expected, with gross domestic product (GDP) rising by 2.3% in the fourth quarter.

That was below projections of 2.6% growth indicated in a Bloomberg survey of economists prior to the government release Thursday – but the economy is showing little sign of flagging, with its continuing strength a key reason behind the Federal Reserve’s decision to pause interest rate cuts yesterday.

Fed chair Jerome Powell signaled at a press conference yesterday that the central bank was in no rush to lower rates again and was waiting to see whether the inflation outlook changes in the weeks and months ahead.

The overall pace of growth in 2024 was 2.8%, marking little change from the prior year with consumer spending up by 4.2% throughout the fourth quarter, driven mainly by a jump in motor vehicle sales.

Joel Kan, vice president and deputy chief economist at the Mortgage Bankers Association (MBA), said the report suggested Fed watchers should expect fewer cuts this year and little change to mortgage rates in the 12 months ahead.

“These results are consistent with the FOMC’s view that the economy and job market remain strong,” he said. “However, inflation is still above the Fed’s 2% target, reinforcing the need to hold the Fed funds rate at its current level for a little longer to keep inflationary pressures in check.

“We expect one additional rate cut later this year, with longer-term rates and mortgage rates expected to remain in a range close to current levels at least until the end of 2025.”

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