Fed predicts stronger US GDP growth this year

1 Aug 13
The US economy is set to pick up pace in the second half of this year, according to the Federal Reserve.

America’s central bank also confirmed that it will continue its bond-buying programme. Mortgage-backed securities will continue to be purchased at a rate of $40bn per month and longer-term Treasury securities at $45bn per month, which should keen interest rates low and support mortgage markets.

A statement from the Fed’s Open Market Committee said: ‘The committee expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the committee judges consistent with its dual mandate [of maximum employment and price stability].’

The Department of Commerce’s Institute of Economic Analysis this week estimated that the US economy grew by 1.7% in the second quarter of 2013. Growth estimates for the first quarter were revised to 1.1%. This reflected upturns in non-residential fixed investments and exports and small decreases in government spending.

A change to the way US GDP is calculated was introduced this month. The gross investment measure now includes research & development spending, art, music, film royalties, books and theatre, with the effect that GDP is 3% bigger.

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