GDP up in US in fourth quarter
January 31, 2007
New data released on Wednesday showed that the gross domestic product in the US was 3.5 percent higher in the final quarter of 2006, following on a gain of 2 percent in the third quarter. However, the rise in core prices were up at rate of 2.1 percent after growing by 2.2 percent in the previous quarter. Most of the growth was said to be linked to a 4.4 percent rise in personal consumption during the quarter.
The new data did not have much influence on the Federal Reserve’s latest interest rate decision. The Fed left interest rates at their current 5.25 percent. Most analysts believe that the Fed is more likely to raise than to lower rates later in the year. Still, most expect that rates will neither rise nor fall either today or later in the year even though many analysts still see a moderate risk for inflation.
Where the new GDP figures did have an effect was in currency and government bonds markets. The dollar was higher versus both the yen and the euro. In addition, yields on US Treasury bonds rose, with ten-year issues yielding 4.9 percent and yields on 30-year paper up to 5 percent. After the Fed announced its interest rate decision, leaving the rate at 5.25 percent for the fifth meeting in a row, yields on 10-year bond dropped to 4.84 percent.
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