Data about the US GDP was one of the last significant numbers that the market learned before next week’s Federal Reserve meeting. The increase of 3.3% was impressive. This is the result for the IV quarter in annual terms, annualized and adjusted for season. These figures clearly show that the US economy has still achieved good results in recent months, especially when we compare this result to those achieved by other currency areas.
GDP data increases the likelihood of a “soft landing” scenario for the US economy. However, this does not mean that a stronger slowdown in the coming months is unlikely. Thursday’s publication only delays the vision of a deep recession, which would be the consequence of earlier, drastic interest rate raises.
The strong economy allows the Fed to continue to be a restrictive central bank and stay on this course for some time. The falling inflation, however, will be an argument for easing monetary conditions in the near future. If macro data were significantly worse, the pressure for cuts would certainly be greater.
Other central banks, mainly the ECB, do not have such a comfortable situation. Here, continuing restrictive monetary policy will be significantly more painful. Europe is in a slump. Special effects are in operation in the eurozone. The weak growth is mainly due to higher energy prices, which are the fallout of the war. Aggressive fiscal policy in the US is not insignificant and supports growth. The US economy also has a structural advantage in growth after the pandemic period. Meanwhile, the rebound in China’s business cycle after lifting Covid restrictions still falls short of its potential.
Łukasz Zembik, Oanda TMS Brokers
