The Balance Today: News You Need To Know on Aug. 25, 2022

Looks like the economy isn’t doing as badly as we had originally thought. While gross domestic product (GDP) did decline in the second quarter this year, the second estimate from the Bureau of Economic Analysis (BEA) this morning showed it only sank 0.6%, better than the 0.9% originally estimated. The upward revision was due to an increase in exports, and stocks are rising in the wake of this better-than-expected data.

This figure comes a day ahead of the release of an important measure of inflation, personal consumption expenditures (PCE). The PCE Price Index is the Federal Reserve’s preferred way to gauge inflation because it provides a more accurate picture of inflation for people in the U.S., compared to the Consumer Price Index (CPI), which primarily looks at inflation for urban shoppers.

So why is this so important right now? Central bankers are in Jackson Hole, Wyoming today, kicking off the three-day Jackson Hole Economic Symposium. Tomorrow, Fed Chair Jerome Powell will give a speech that could offer more insights into how the central bank views the economy, and any future moves it’ll make on interest rates. The Fed has been aggressively raising interest rates as policymakers fight to bring down inflation.

The Fed’s efforts have raised fears about the ability of the economy to withstand an economic slowdown, which could cause a recession. But with GDP sinking less than we thought, combined with a strong jobs market, the Fed’s case could remain that the U.S. economy is strong enough to handle rising rates.