How Fast Did the U.S. Economy Grow, and What Could the Fed Do Next?

The U.S. economy grew at an annualized rate of 3.4% in the three months ending in September, according to a Commerce Department report released Thursday. ABC News reported that the figure is faster than the previous two quarters, even as inflation stays well above the Federal Reserve's goal.

The strong growth comes alongside higher borrowing costs and a central bank that is weighing whether to raise interest rates again.

How does the third-quarter growth compare with earlier this year?

The 3.4% pace is an acceleration from the 2.2% annualized growth recorded in the second quarter, the Commerce Department data showed. It also topped the 2.5% rate from the first three months of the year, ABC News reported.

What is driving the economy?

ABC News pointed to several signs of resilience. Hiring has continued to grow, though more slowly, and unemployment has remained low by historical standards. A surge in spending on artificial intelligence has also lifted the economy in recent quarters, as many of the nation's largest companies have spent heavily on the chips and data centers needed to run AI systems.

Where does inflation stand?

Prices rose 3.7% in September compared with a year earlier, according to government data cited by ABC News. That is more than a percentage point above the Fed's 2% target. ABC News described the acceleration of price increases this year as a challenge for Fed officials, who are tasked with keeping inflation in check.

What did the Fed do, and what did its chair say?

The Fed left interest rates unchanged on Wednesday while it waits for more economic data, ABC News reported. Last month, the central bank raised rates by a quarter of a percentage point, the first increase in three years.

Fed Chair Kevin Warsh, who took the job in May, said at a press conference in Washington that economic activity is expanding at a strong pace. He added that uncertainty remains, partly because of geopolitical developments, but that domestic spending has been resilient. On inflation, he said, "It's our responsibility to get inflation down."

Why does it matter for borrowers and workers?

ABC News reported that a key long-term Treasury rate has climbed in recent months because investors worry that rising prices will erode their returns. The increase in bond yields has pushed up rates on loans such as credit cards and mortgages, which the outlet said threatens to worsen the financial strain on households.

The jobs picture is also tied to the Fed's next steps. ABC News noted that another rate increase would press harder on the economy, risking sluggish growth and a further slowdown in the job market. Hiring is still growing, but at a slower pace than before.

What happens next?

The Fed's next meeting is in December. According to CME Group's FedWatch Tool, which gauges market sentiment, the odds of another quarter-point rate increase at that meeting are about 85%. ABC News reported that policymakers may lose patience as they judge whether current rates are high enough to ease price increases. No decision has been made.

Around Prague, based on reporting by ABC News