Despite high interest rates, US GDP still grew by 2.8% last year, according to the Ministry of Trade.
The US Department of Commerce evaluated government spending, consumption and investment were the driving force for growth last year. In 2023, the US GDP increased by 2.9%, according to the official adjustment data published in September 2024.
Economic growth in the fourth quarter of 2024 reached 2.3%, slower than the average of the first 3 quarters of the year (3.1%). However, consumer spending – accounting for more than two -thirds of the economy – increased by 4.2% in the previous quarter, after reaching 3.7% in the third quarter.
Brendan Boyle, a member of the House of Representatives budget, said that the results of the fourth quarter GDP were “undeniable evidence” showed that policies under President Biden had proven effective.
Vehicles on the 5th Boulevard in Manhattan, New York, January 5, 2025. Image: Reuters
In general, in 2024, the largest economy in the world still stands in high interest rate environment, thanks to the strong labor market, low unemployment rate and increased salary. This allows consumers to continue spending.
This result also shows that the US Federal Reserve (Fed) raised interest rates by 5.25 percentage points in 2022 and 2023 to curb inflation, not to bring the country into recession as many experts worry. hesitate. In contrast, the economy grows significantly higher than 1.8% that policy makers consider the speed without causing inflation.
AFP Given that President Donald Trump has inherited the strong economy when taking office. Previously, the dissatisfaction of the people with the economy was the main reason to help him win in the election in early November 2024.
On January 29, the Fed announced the basic interest rate in the range of 4.25-4.5%, after decreasing 100 basic points since September 2024. In the policy statement after the meeting, the Fed removed the phrase that inflation “had progressed” towards 2%.
Fed President Jerome Powell assessed the economy “generally still strong”. This agency intends to reduce interest rates twice this year, less than 4 times forecasted in September 2024. This reflects the uncertainty of economic impacts from the Trump administration’s fiscal, trade and immigration policies.
Experts believe that the plan of tax reduction, widespread import tax and a series of illegal immigrants may increase inflation. They predict that the US growth will slow down in the second half of the year and inflation goes up.