U.S. Economy Shows Resilience Amid Interest Rate Hikes and Inflation Control

The American economy grew at a 3% annual pace from April to June, driven by consumer spending and business investment. Despite facing 11 interest rate hikes by the Federal Reserve, inflation has decreased to 2.5%. However, job growth has slowed, and concerns remain about high prices for necessities.

The American economy expanded at a healthy 3% annual pace from April through June, supported by strong consumer spending and business investment, the government reported on Thursday, affirming its previous estimate.

The Commerce Department revealed that gross domestic product (GDP) growth accelerated significantly in the second quarter, up from a modest 1.6% annual rate in the first three months of the year. Consumer spending, the economy's main engine, increased at a 2.8% pace last quarter, slightly down from an earlier estimate of 2.9%. Business investment surged by 8.3%, led by a nearly 10% rise in equipment investment.

The U.S. economy, the largest globally, demonstrated remarkable resilience despite 11 interest rate hikes by the Federal Reserve in 2022 and 2023 to combat the worst inflation in four decades. As inflation, measured by the consumer price index, dropped from 9.1% in mid-2022 to 2.5%, closer to the Fed's 2% target, the economy continued to grow and employers maintained hiring. However, job market growth has slowed recently, and the unemployment rate has risen to 4.2% from last year's 3.4%. In response to these challenges, the Fed cut its benchmark interest rate by half a point, its first rate reduction in over four years, shifting focus to supporting the labor market now that inflation is mostly controlled.

(With inputs from agencies.)