Follow the bouncing GDP
Economic growth in America paused in the third quarter, growing by 1.5 percent, compared to 3.9 percent in the second quarter and a bare 0.6 percent in the first three months of this year.
That's very likely why the Federal Reserve Board held off, once again, on its long-awaited plan to boost interest rates as the economic recovery gains strength. Clearly, it's not strong enough yet to stand on its own, especially as major economies in other nations remain weak or show signs of stumbling.
In its announcement yesterday, the Fed reaffirmed its plan to hold the federal funds interest rate at near zero, until more progress is made toward full employment and a reasonable rate of inflation -- in the Fed's mind, that means 2 percent inflation and less than 5 percent unemployment.
Today, that decision was supported by the news from the Department of Commerce that the nation's output of goods and services -- GDP -- slid to a 1.5 percent growth rate, in the July-September period, from more than twice that rate in the earlier three-month time frame.
The Fed's Open Market Committee noted that it would revisit the question at its next meeting, in mid-December, and hinted that it just might tighten the interest rate a very light touch then. Then again, they might not. Don't expect them to put the screws on borrowing just as the holiday season is at its height.
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