Thursday 27th January 2022 - 13:57 (GMT)
Figures released by the US Bureau of Economic Analysis have indicated the US economy expanded at a rate of 6.9% on an annualised basis over the final quarter of 2021. This was significancy above the 5.5% market expectation and also marked the USA’s strongest yearly economic performance since 1984.
Annualised GDP stood at 5.7% and was bolstered by a robust recovery in consumer spending, increases in business spending and higher levels of imports. The main drags came from a reduction in government spending, along with lower levels of imports.
The impact of Omicron during late 2021 also appears to have been less significant than expected and the news immediately stoked market demand for USD.
Moving forward, the threat of reduced households purchasing power and runaway inflation now pose the biggest threat to derail continued recovery over 2022. In response, the Federal Reserve hinted at rate hikes as soon as March - with Fed Chairman Jerome Powell’s hawkish remarks triggering a US dollar rally whilst also weighing heavily on major global equity markets.
Mr Powell told reporters on Wednesday after a two-day policy meeting that "the economy no longer needs sustained high levels of monetary policy support," and that "it will soon be appropriate to raise" interest rates.
The sharp rebound in growth last year will also offer some cheer for President Biden whose popularity is falling amid a stalled domestic economic agenda after the U.S. Congress failed to pass his signature $1.75 trillion Build Back Better legislation.
