Thursday's reports on growth and inflation contained few surprises for the Federal Reserve, which held interest rates steady a day earlier. The economy grew at a 3.4% annual rate in the third quarter, slightly faster than economists expected, and core prices in the Fed's preferred inflation gauge rose 0.32% in September, in line with forecasts. Core prices, which exclude volatile food and energy items, were up 3.1% on the year. The Fed targets 2% inflation.
Chairman Kevin Warsh had effectively previewed the growth figures Wednesday, describing an "even more rapid advance" in the third quarter. Forecasters who closely followed the consumer and wholesale price reports released two weeks ago would have already known the inflation figures.
The data don't change the picture officials had when they decided to wait, and they help explain why investors see a December rate increase as very likely. They also put the focus on what Warsh called an "information rich" six weeks ahead.
Before the Dec. 8-9 meeting, officials will see two more months of labor-market data and one more month of inflation figures. They will also be able to assess how the run-up in bond yields since September is affecting demand, whether recent turbulence in AI-linked stocks and credit deepens, and whether fighting with Iran escalates after next week's midterm elections, which could keep energy prices elevated.
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