GDP Growth Hits 2.8% in 2024 as Fed Holds Rates, Trump Eyes Policy Shifts/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The U.S. economy grew at a 2.3% annual rate in the final quarter of 2024, bringing full-year GDP growth to 2.8%, slightly below 2023’s 2.9% expansion. Consumer spending surged 4.2%, its fastest pace in nearly two years, while business investment declined. The Federal Reserve kept interest rates unchanged, citing persistent inflation pressures. As President Donald Trump re-enters office, the economic outlook remains uncertain, with tax cuts and deregulation potentially boosting growth, but tariffs and immigration policies posing risks of slower expansion and higher prices.
Quick Look:
- Q4 GDP Growth: 2.3% annual rate, slightly below economist expectations of 2.4%.
- Full-Year Growth: 2.8% in 2024, compared to 2.9% in 2023.
- Consumer Spending Surge: 4.2% growth, the fastest pace since early 2023.
- Business Investment Decline: Equipment investment dropped sharply, following two strong quarters.
- Inflation Pressures:
- Fed’s preferred inflation gauge (PCE Index): 2.3% in Q4, up from 1.5% in Q3.
- Core PCE Inflation (excluding food & energy): 2.5% in Q4, up from 2.2% in Q3.
- Unemployment Rate: 4.1% in December, remaining near historic lows.
- Fed Interest Rate Decision:
- Held steady after three cuts since September.
- Chair Jerome Powell: “No hurry to cut further.”
- Comparison to Europe:
- U.S. GDP growing steadily, while Europe recorded 0% growth in Q4.
Trump’s Return: Economic Uncertainty Ahead
- Potential Boost to Growth:
- Planned tax cuts and deregulation could spur business investment and hiring.
- Trump has promised to lower oil prices and pressure the Fed for rate cuts.
- Potential Risks:
- Proposed tariffs on imports could increase consumer prices and slow growth.
- Mass deportation policies could reduce labor availability, impacting agriculture and construction.
- Federal spending freeze and economic policy shifts could weigh on GDP growth.
Looking Ahead:
- Economists predict slightly slower growth in early 2025, possibly below 2% GDP expansion.
- Fed remains cautious as inflation pressures persist.
- Trump’s economic policies could reshape business investment, trade, and job markets.
GDP Growth Hits 2.8% in 2024 as Fed Holds Rates, Trump Eyes Policy Shifts
U.S. Economic Growth Holds Steady, But 2025 Outlook is Uncertain
Q4 and Full-Year GDP Performance
The Commerce Department’s latest report showed that the U.S. economy remained strong through the end of 2024, though slightly below expectations.
- Q4 GDP Growth: 2.3% annualized rate, just below the 2.4% forecasted by economists.
- Full-Year Growth: 2.8% in 2024, compared to 2.9% in 2023.
- Consumer Spending: Jumped 4.2%, the fastest pace since early 2023.
- Business Investment: Fell, with a sharp drop in equipment investment after two strong quarters.
- Inflation Pressure: The Fed’s preferred inflation gauge rose to 2.3% in Q4, up from 1.5% in Q3, remaining above the 2% target.
Resilient Economy Defies Recession Fears
Despite aggressive Fed rate hikes in 2022 and 2023, which many economists feared would cause a recession, the U.S. economy continued expanding.
“The economy remains strong, particularly given fourth-quarter disruptions,” said Paul Ashworth, chief North America economist at Capital Economics, referencing the Boeing strike and hurricanes that impacted business activity.
Federal Reserve Holds Rates Steady
The Federal Reserve kept its benchmark interest rate unchanged on Wednesday, after making three cuts since September.
“We do not need to be in a hurry to make more cuts,” Fed Chair Jerome Powell said, citing steady economic growth and inflation concerns.
The European Central Bank, however, cut its interest rate this week as Europe’s economy stagnated with 0% growth—highlighting the relative strength of the U.S. economy.
Trump’s Return to Office: Economic Policies and Potential Risks
As Trump begins his second term, his policies could significantly impact GDP growth:
Potential Boost to Growth:
- Planned tax cuts and deregulation could spur business investment and hiring.
- Trump has promised to lower oil prices and pressure the Fed to cut interest rates.
Potential Risks:
- Proposed tariffs on imports could raise consumer prices and slow economic expansion.
- Mass deportation plans could reduce available labor, affecting key industries like agriculture and construction.
- A federal spending squeeze could drag down economic growth, according to analysts.
“We wouldn’t be surprised to see GDP growth slow below 2% in the first quarter of 2025,” Ashworth noted.
Final Thoughts: Strong Economy Faces Policy Uncertainty
The U.S. economy enters 2025 on solid footing, but Trump’s policy shifts could either accelerate or disrupt growth. With inflation still above target and the Fed cautious on rate cuts, the next few months will be crucial in shaping the trajectory of the economy.
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