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Delta variant complicates Powell’s policy decision

The preliminary (or second update) for the second quarter US GDP showed a mild strengthening versus the initial release, increasing marginally from 6.5% initial to preliminary 6.6% annualised rate of growth over the quarter on stronger business investment and a boost in exports.

Thursday, August 26, 2021

The preliminary (or second update) for the second quarter US GDP showed a mild strengthening versus the initial release, increasing marginally from 6.5% initial to preliminary 6.6% annualised rate of growth over the quarter on stronger business investment and a boost in exports. That compares to the 6.3% growth in the first quarter, so a continuation of sorts of the increasing momentum in the US economy. The largest component of GDP, personal consumption, expanded further rising 11.9% in the second quarter as lockdowns were widely lifted. One note of caution though is the rapid spread of the Delta variant in the US began only over the last few weeks so this will no doubt sow seeds of confusion into policy makers decision making processes, the most obvious one being the Jackson Hole virtual symposium happening over the next few days. While it’s unlikely that we will see ground-breaking announcements on tapering, which is what the markets are most concerned with, it’s possible still that the runes may be misread by markets if Fed Chair Powell missteps.

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Charles Hepworth

Investment Director
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