According to the data from Commerce Department, the US economy grew by 5.7%. It is the highest rate since 1984. However, this rate might slow down due to the scale of stimulus spending and the rise of interest rates. Other factors that can influence the growth rate are inflation and the new Covid variant. The World Bank predicts a 3.7% growth rate in 2022. Consumer spending and government stimulus helped power the rebound from 2020. The labor market has regained 19 million of the 22 million jobs lost amid the shutdown that year. President Biden said that he is not surprised, it is a result of the government's recovery effort. On Wednesday, Federal Reserve Chairman Jerome Powell pointed out that the central bank would raise its key interest rate in March for the first time since 2018, claiming that the economy no longer required the extra-low borrowing costs imposed in 2020 to help it grow. The US faced the highest inflation rate in nearly 40 years. As a result of the fears, US stock markets have dropped for three weeks in a row, with more recent data showing a slowdown similar to what Omicron experienced in December and January. "Today's figures measure GDP up until the end of December 2021, excluding some of the recent surges in Covid-19 cases," said Richard Flynn, managing director at Charles Schwab UK. "Indeed, there's been weakness across US stock indices in the first weeks of 2022, as investors digest some of the risks facing the economy: receding monetary and fiscal liquidity, persistent effects from the pandemic, and a rise in inflationary pressures."
It will be interesting to see how the economy will respond due to the increase of interest rates. I think the FED will take a gradual approach in increasing the interest rates so that they can counter inflation while still allowing for economic growth. Covid will also play a big role in the economy as uncertainty with labor and supply shortages.
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