input2024.04.26 14:11
correction2024.04.26 15:42
Growth was slower than expected, but inflation hit 3.4%
Fed likely to focus on controlling inflation even if GDP growth slows
U.S. Treasury yields hit highest since November last year
Concerns have begun to emerge that the U.S. economy has fallen into stagflation, a period of inflation amid a recession. This is because the growth rate of the U.S. economy in the first quarter slowed more than expected, but the inflation rate rose above 3%. As analysis emerged that the U.S. Central Bank (Fed) would implement a monetary policy that focuses on the inflation rate rather than the growth rate, U.S. Treasury yields hit their highest in five months.
The U.S. 2-year Treasury bond interest rate exceeded 5% per year during intraday trading on the 25th (local time), reaching the highest level since November of last year. The US 10-year interest rate also rose to 4.72% per year.
The surge in U.S. Treasury yields is due to the Personal Consumption Expenditures (PCE) price index announced by the U.S. Department of Commerce along with the growth rate of gross domestic product (GDP) for the first quarter of this year (breaking news). The PCE growth rate in the first quarter was 3.4%, significantly exceeding the previous quarter’s growth rate of 1.8%.
On the other hand, the GDP growth rate in the first quarter was calculated at an annual rate of 1.6%. This is a significant slowdown from 3.4% in the fourth quarter of last year. It was lower than the first quarter forecast (2.4%) of experts compiled by Reuters.
It is true that the GDP growth rate is lower than expected, but Wall Street’s view is that it is not at a level that warrants the Fed cutting interest rates. More weight is being placed on the prospect that the Fed will be able to maintain the current interest rate level of 5.25-5.5% per annum for a longer period of time.
“GDP growth of 1.6% is a fairly solid growth rate,” said Matthew Ryan, head of market strategy at Every, a financial services company. “The Fed will pay much more attention to inflation.”
After the first quarter GDP announcement, all three major New York stock market indices showed significant declines. The Dow Jones index plunged more than 600 points at one point, and the Nasdaq index also fell more than 200 points during the day. However, as calm was regained in the latter half of the market, the decline was greatly reduced.
Accordingly, the Dow Jones Index closed trading at 38,085.80, down 375.12 points (0.98%) from the previous trading day. The S&P 500 index fell 23.21 points (0.46%) to 5,048.42, and the Nasdaq index fell 100.99 points (0.64%) to 15,611.76.
New York = Correspondent Park Shin-young [email protected]
Tags: quarter growth rate price shock .. #2year maturity government bond interest rate exceeds annum
