The US economy grew at an annualized rate of 2.9% in the third quarter, soundly beating consensus forecasts of 2.5% and, in doing so, further supported the Federal Reserve’s stated objective of raising interest rates before the year is out.

The US Commerce Department’s first estimate of Q3 GDP is s solid improvement on Q2’s lackluster 1.4% annualized rate and came despite a moderation in consumer spending.

Economists had harbored persisting fears that the economy was headed for a stall since, for the first six months of the year, growth had averaged at just 1.1%.Markets reacted positively overall with the US dollar strengthening against those of its major trading partners, the price of US treasuries falling as yields rose and stocks ended the trading day just 8 points off.

“This news will help put paid to any lingering doubts over US economic momentum and, in the absence of any surprises elsewhere, I think we can consider a December hike in US interest rates to be a done deal,” said Jun Li Park, chief investment officer at Virtus International.

The Federal Reserve last raised interest rates in December 2015, the first hike after eight years of near-zero borrowing costs. It has had its plans to raise rates 3 or 4 times in 2016 hampered by deterioration of the economic outlook both at home and abroad but with recent economic data appearing to pick up, it will likely be able to get one increase in before the end of 2016.

“Even with a December hike, monetary policy will still incredibly easy relative to historical averages so we wouldn’t be in a hurry to lighten up on emerging market equity exposure. Indeed, it’s Virtus International’s view that a December hike is already reflected in current equity prices so now is a good time to take on a little more risk,” said Park.

About Virtus International:
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