In the United States, the ‘final’ reading for June quarter GDP will be released and it is set to confirm that annual economic growth picked up to around 2.25 per cent from levels around 1.5 per cent a year ago. It is still below the 2.75 per cent or so that is considered to be the long run potential rate of expansion for the US.
The speed of the growth pick up has been moderate which has been a critical factor behind the Federal Reserve’s slow and steady path to higher interest rates and its cautious approach to scaling back quantitative easing. Unless there are concrete signs of a further acceleration in GDP growth to around 2.75 per cent or more, the Fed is unlikely to hike more than once or twice over the next year.
