"We haven't seen an acceleration in growth yet that the Fed is looking for to begin tapering"
- Joshua Dennerlein, an economist at Bank of America Merrill Lynch
The U.S. economy grew at the fastest pace this year while households moderated their spending and businesses cut investments. In light of the partial government shutdown and debt-ceiling talks earlier this quarter, there is a little chance of a pickup in growth before the end of the year, analysts say. The Commerce Department estimated that the U.S. GDP rose 2.8% on an annual basis in the third quarter, up from a 2.5% advance in the prior three months. The major contributor to the economy's growth was a one-time buildup of inventory among businesses, which is likely to reverse in case demand is not strong enough for companies to draw down those stocks. A gauge of domestic demand increased 1.7%, which analysts believed was insufficient to urge the Fed to wind down its bond purchases. However, the longer the U.S. central bank maintain its QE programme unchanged, the higher the odds it will face a year without any money to give the U.S. Treasury. This could invite increased scrutiny from lawmakers, who are already critical of the Fed's policies. As William C. Dudley, Federal Reserve Bank of New York President, said last month, the central bank's balance sheet expansion creates some budget risk, which threatens the institution's independence. The Fed receives interest payments on holdings of government securities and mortgage debt, which are used for the operations of its board of governors and 12 regional reserve banks, returning the remained to the U.S treasury.
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