US GDP grew by 1.7% in the second quarter, improving against last quarter’s 1.1% increase. Unfortunately, much of the growth resulted from a build-up in inventories driven by slowing consumer spending. Core inflation at 1.6% remains mild while the US jobless rate will likely improve to 7.5% on a hiring pick up in July. Investor sentiment and consumer confidence are decidedly upbeat given positive trends in equities and home prices. Recent sharp increases in mortgage rates, however, are already dampening housing demand. In our view, these signs suggest continuing quantitative easing at odds with current tapering fears. Apparently, the Fed concurs, confirming yesterday that it would still be buying $85 billion of bonds per month.