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The Fed Tapers While GDP Surges

It has been a big week of news so far, with this morning’s second-quarter gross domestic product (GDP) print showing the economy grew some 4% from April through June. That number was a welcome relief from the revised contraction of 2.1% in the winter-ravished first quarter.

The economy now seems on pace to deliver GDP growth of about 2%, which is not fantastic, but not bad either. I think what today’s GDP print tells us is that the Federal Reserve will almost certainly continue the taper of its bond-buying program. The Fed also will likely stay the course, depending on the data, and raise interest rates sometime in mid-2015.

That’s essentially the path the Fed took in its latest Federal Open Market Committee (FOMC) meeting. The central bank continued to taper its asset purchases by $10 billion per month, as expected, and it also left short-term interest rates alone at near-zero. The Fed’s statement contained language that acknowledged prices were climbing to their 2% inflation target. It also acknowledged improved economic conditions and an improving labor market.

Read more about the interaction between the Federal Reserve and gross domestic product at Eagle Daily Investor.

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archive

The Fed Tapers While GDP Surges

I think what today‚??s GDP print tells us is that the Federal Reserve will almost certainly continue the taper of its bond-buying program.

It has been a big week of news so far, with this morning‚??s second-quarter gross domestic product (GDP) print showing the economy grew some 4% from April through June. That number was a welcome relief from the revised contraction of 2.1% in the winter-ravished first quarter.

The economy now seems on pace to deliver GDP growth of about 2%, which is not fantastic, but not bad either. I think what today‚??s GDP print tells us is that the Federal Reserve will almost certainly continue the taper of its bond-buying program. The Fed also will likely stay the course, depending on the data, and raise interest rates sometime in mid-2015.

That‚??s essentially the path the Fed took in its latest Federal Open Market Committee (FOMC) meeting. The central bank continued to taper its asset purchases by $10 billion per month, as expected, and it also left short-term interest rates alone at near-zero. The Fed‚??s statement contained language that acknowledged prices were climbing to their 2% inflation target. It also acknowledged improved economic conditions and an improving labor market.

Read more about the interaction between the Federal Reserve and gross domestic product at Eagle Daily Investor.

Newsletter Signup.

Sign up to the Human Events newsletter

Written By

Doug Fabian is the editor of Successful Investing and High Monthly Income, and is the host of the syndicated radio show, "Doug Fabian's Wealth Strategies." Taking over the reigns from his dad, Dick Fabian, back in 1992, Doug has continued to uphold the reputation of the newsletter as the #1 risk-adjusted market timer as ranked by Hulbert‚??s Investment Digest. For more than 30 years, Successful Investing (formerly the Telephone Switch Newsletter) has produced double-digit annual gains. Doug has become known for his expert knowledge and timely use of innovative tools like Exchange Traded Funds, bear funds and Enhanced Index funds to profit in any market climate.

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