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October 13, 2016 Article 1 min read

Executive summary 

  • The final estimate of Q2 GDP indicated that the economy grew at a moderate 1.4 percent rate, well below initial expectations at the beginning of the quarter. However, consumer spending surged by 4.3 percent (annualized) during the quarter.
  • Inflation measures have continued to inch higher in recent months, as CPI reached 1.1 percent on a year-over-year basis in August. Core PCE, the Fed’s preferred measure of inflation, edged upward to 1.7 percent year-over-year, still short of the Fed’s 2 percent target.
  • Concerns surrounding the impact of “Brexit” and accommodative monetary policy actions from global central banks seem to have abated as long-term interest rates rose modestly. The 10-year U.S. Treasury yield ended the quarter at 1.60 percent, up from 1.49 percent at the start of the quarter.
  • The labor market remains solid, creating an average of 192,000 new jobs per month in Q3. The unemployment rate edged up to 5.0 percent as more people entered the workforce.
  • The FOMC determined to leave short-term interest rates untouched in September. However, expectations for a December hike have risen, as evidence appeared of a growing rift within the FOMC on the need to hike.