Another firmer-than-anticipated inflation report delivered a meaningful setback Wednesday to the Federal Reserve’s hope that it could buoy prospects of a so-called soft landing by dialing back some of the past year’s interest-rate increases.

Solid hiring and the prospect that inflation might settle out closer to 3% than the Fed’s 2% goal could call into question whether the central bank will be able to cut rates until much later in the year without evidence of a sharper slowdown in the economy.

President Joe Biden is standing by his prediction that the Federal Reserve will enact an interest rate cut before the end of the year. The President doubled down on the rate cut prediction despite a Consumer Price Index (CPI) print released on Wednesday suggesting that inflation was reaccelerating.

The economy grew at a much more rapid pace than expected while inflation eased in the final three months of 2023, as the U.S. easily skirted a recession that many forecasters had thought was inevitable, the Commerce Department reported Thursday.

Gross domestic product, a measure of all the goods and services produced, increased at a 3.3% annualized rate in the fourth quarter of 2023, according to data adjusted seasonally and for inflation.

The federal government’s debt grew more than twice the amount that the economy did in the fourth quarter of 2023, as measured by gross domestic product (GDP).

The U.S. economy expanded at a 3.3% annualized pace in the final quarter of 2023, the Commerce Department said on Thursday.

Why it matters: It's much stronger growth than economists expected and caps a year of economic resilience as the nation avoided a projected recession.

The economy moderated in the September-December period compared to the previous quarter's 4.9% growth, which got a notable boost from companies building up inventories.

The U.S. economy grew at a faster pace than expected at the end of 2023, underscoring its resilience even in the face of still-high inflation and steep interest rates.

Gross domestic product, the broadest measure of goods and services produced across the economy, grew by 3.3% on an annualized basis in the three-month period from October through December, the Commerce Department said in its first reading of the data Thursday.

The U.S. economy continued to grow at a healthy pace at the end of 2023, capping a year in which unemployment remained low, inflation cooled and a widely predicted recession never materialized.

Gross domestic product, adjusted for inflation, grew at a 3.3 percent annual rate in the fourth quarter, the Commerce Department said on Thursday. That was down from the 4.9 percent rate in the third quarter but easily topped forecasters’ expectations and showed the resilience of the recovery from the pandemic’s economic upheaval.

A Congressional Budget Office (CBO) report on Friday forecasts a rise in U.S. unemployment from the current 3.9 percent to 4.4 percent by the end of 2024, signaling potential job losses for millions amidst a contracting gross domestic product (GDP).

The projected increase in unemployment, affecting an estimated 7.4 million Americans within the workforce, will come amidst economic adjustments and policy shifts, the CBO said in its "Current View of the Economy From 2023 to 2025" report.

The U.S. economy grew at an even stronger pace then previously indicated in the third quarter, the product of better-than-expected business investment and stronger government spending, the Commerce Department reported Wednesday.

Gross domestic product, a measure of all goods and services produced during the three-month period, accelerated at a 5.2% annualized pace, the department’s second estimate showed. The acceleration topped the initial 4.9% reading and was better than the 5% forecast from economists polled by Dow Jones.

The Federal Reserve on Wednesday held interest rates steady for the third time this year even as central bankers confront a surprisingly resilient economy and still too-high inflation.

The widely expected decision left interest rates unchanged at a range of 5.25% to 5.5%, the highest level in 22 years. But policymakers also left the door open to an additional increase before the end of the year amid concerns that inflation "remains elevated."