The US economy grew less than 2 percent in the first quarter for the first time in over a year and a half, based on a new government report released Thursday.
The Gross domestic product (GDP) increased by 1.6 percent annually in the first quarter, which is lower than the 2.2 percent that economists predicted.
After a strong 4.9 percent GDP growth in the third quarter of 2023, there has been a noticeable decrease. This could be a positive sign for the Federal Reserve, which wants the economy to stay strong, but not so strong that it causes high prices.
Inflation has slightly increased to 3.5 percent year-over-year in March, according to the latest consumer price index (CPI) from the Labor Department. This is a significant drop from the over 9 percent inflation in June 2022, but still higher than the central bank’s 2 percent target.
Surprisingly high inflation, job market, and GDP readings have given the Fed more room to decrease borrowing costs, which the central bank committee raised to a range of 5.25 to 5.5 percent last July from near zero in March 2022.
The most recent growth report is just one piece of data the Federal Open Market Committee (FOMC) will consider when it meets next week to decide whether to lower borrowing costs or keep rates steady. The BEA will also release the most recent reading of the Fed’s preferred inflation gauge, personal consumption expenditures (PCE) index, on Friday.
The US economy has been remarkably strong, with 303,000 jobs added just last month and the longest period of a sub-4 percent unemployment rate since the 1960s. Many economists expected a recession a year ago, but now expect the Fed to lead the economy to a rare “soft landing.”
However, high prices continue to be a major concern for voters in the upcoming 2024 presidential election, and the persistently high prices are becoming a problem for President Biden’s reelection campaign, even as he touts the strength of the economy.
