US economy grew much faster than expected in second quarter

(NEW YORK) — The U.S. economy grew much faster than expected over three months ending in June, accelerating from the previous quarter and defying concerns about a possible slowdown.

U.S. GDP grew at a 2.8% annualized rate over three months ending in September. That figure doubled the annualized rate of growth undertaken over the previous quarter.

The economic expansion reflected a surge in consumer spending, the U.S. Bureau of Economic Analysis said on Thursday. The uptick in spending included purchases of housing, and cars, among other items, the BEA added.

The fresh data delivers a strong bill of health for the nation’s economy. The robust performance defies a years-long period of high interest rates, which typically weigh on demand and slow economic activity.

However, the continued growth could complicate the path toward a widely expected interest rate cut from the Federal Reserve in September.

Until the most recent quarter, the economy had been cooling. That trend gave the Federal Reserve confidence that its high interest rates had indeed slowed output and contributed to a slowdown of price increases.

Price increases have slowed significantly from a peak of more than 9%, though inflation remains more than a percentage point higher than the Fed’s target rate of 2%. An outright drop in prices in June compared to the month prior marked a major sign of progress in slowing inflation.

If the Fed cuts interest rates as the economy is heating up, however, the central bank risks rekindling rapid price increases.

The chances of an interest rate cut at the Fed’s meeting in September stand at more than 80%, according to the CME FedWatch Tool, a measure of market sentiment.