Q3 GDP Beats at 3.4% as Fed Odds Tilt Toward December Hike

The economy grew at a 3.4% pace in the third quarter, topping the 3.2% LSEG forecast, even as inflation stayed stubbornly hot.

The Commerce Department's advance GDP estimate came alongside September's PCE price data: headline inflation rose 0.5% on the month and 3.6% from a year earlier, up from 3.4% in August. Core PCE, which strips out food and energy, rose 3.1% year over year, up from 3%. Both readings matched forecasts. The personal savings rate slipped to 3.8% of disposable income from 4%.

Edward Jones' James McCann described a consumer and AI investment boom pushing growth "well above trend," while expecting rising oil prices and tighter financial conditions to cool activity toward year-end.

The Federal Reserve, led by Chair Kevin Warsh, held its rate at 3.75% to 4% on Oct. 28, a month after a September hike. The vote was 10-2, with Cleveland Fed President Beth Hammack and Governor Lisa Cook both wanting another quarter-point increase. The committee said activity "is expanding at a strong pace," and Warsh said there is "no soft inflation target": the goal is 2%.

CME FedWatch put the odds of a 25-basis-point hike at the Dec. 8-9 meeting above 80% in recent readings. Warsh also said politics played no role in the October decision. The October jobs report is due Nov. 6.