August 30, 2013

U.S. economy may lead Fed to slow bond purchasing

The economy grew at a stronger-than-expected rate in the last quarter.

The Associated Press

WASHINGTON - A stronger-than-expected rise in U.S. economic growth last quarter will likely strengthen the hand of Federal Reserve officials who want to slow the Fed's bond purchases next month.

The economy grew at a 2.5 percent annual rate from April through June, the government said Thursday. That was more than twice the growth rate in the first quarter and far above an initial estimate of a 1.7 percent rate for April through June.

The Fed is weighing key measures of the economy's health before it meets Sept. 17-18 to decide whether to scale back its $85 billion in monthly bond purchases. The Fed's bond buying has helped keep long-term borrowing rates near record lows. A stronger economy would need less support from the Fed.

Global financial markets have been under pressure over speculation that the Fed will slow its purchases and send interest rates in the United States higher. U.S. rates have already been rising in anticipation of a pullback in Fed bond buying. But the Fed may decide the economy is strengthening enough to withstand higher rates.

 

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