After two consecutive months of contraction, the U.S. economy rose in the third quarter – a sign that activity remains robust despite the Federal Reserve’s aggressive push this year to raise borrowing costs.
The nation’s gross domestic product, or GDP, rose 2.6% in the July-September period, according to a fresh report by the Commerce Department. Economists at FactSet had predicted a growth rate of 2%.
GDP contracted by 1.6% in the first quarter and 0.6% in the second quarter, prompting speculation as to whether the economy had entered a recession.
Bitcoin was steady in the moments after the report was released, around $20,690.
Good news is bad news
While the positive number is a good sign, suggesting that activity is expanding even as costs as wages rise, it also might show that the economy can withstand further interest rate increases by the Fed.
And for most of this year, the U.S. central bank’s aggressive campaign to tamp down inflation – close to a four-decade high – has weighed on valuations for risky assets, from stocks to cryptocurrencies.
After several months of raising interest rates aggressively, central bankers have recently hinted at slowing down the pace of hikes after its next November meeting for fears of overtightening.
U.S. Treasury bond yields have climbed as a result of the Fed’s changes to monetary policy, which is hurting other financial markets, including crypto assets, down significantly year-to-date.
Over the past week, however, bitcoin (BTC) was up 5% as traders showed some relief over the prospects of slower interest rate hikes or even a potential Fed pivot. A recent move by the Bank of Canada to raise rates less robustly than expected also gave traders hope that the U.S. central bank will follow suit on Nov. 2-3.
Today’s positive GDP report proves that the economy is in good shape which gives the Fed a strong reason against a slowdown.
