Investing.com - U.S. economic growth accelerated in the second quarter, matching forecasts and underlining the case for the Federal Reserve to proceed with plans to gradually increase interest rates.
In a report, the Bureau of Economic Analysis said that GDP registered a seasonally-adjusted annual rate of 4.1% growth in the three month period from April to June, nearly double the 2.2% expansion registered in the first quarter of 2018 and its fastest rate of growth since the third quarter of 2014.
The reading was in line with consensus.
The strong reading supports the upbeat assessment of the U.S economy that Fed Chairman Jerome Powell delivered to Congress in testimony last week, reaffirming expectations for two additional rate hikes this year.
“With a strong job market, inflation close to our objective, and the risks to the outlook roughly balanced, the FOMC believes that -- for now -- the best way forward is to keep gradually raising the federal funds rate,” Powell testified on July 17.
Some observers have expressed concerns that the strong rate of growth seen in the second quarter is unsustainable, especially given recent concerns over trade tensions between the U.S. and other parts of the world.
Powell admitted that “it is difficult to predict the ultimate outcome of current discussions over trade policy,” but emphasized that he felt the risk of the economy unexpectedly weakening was roughly balanced with the possibility of the economy growing faster than the Fed anticipated.
“The longer the trade uncertainty continues, the more it is likely to weigh on business sentiment, which could translate into lower capex spending and a slowdown in employment hiring,” ING economists noted ahead of the release.
“However, we have to remember there is a lot of stimulus in the system to provide a cushion -- the $1.5 trillion of tax cuts and the $300 billion of extra government spending this year -- while the tax hike effects of the tariffs enacted so far are only measured in the tens of billions,” they explained.