US economic growth falls short of expectations with 1.6 percent annualized gain

U.S. economic growth fell below 2% in the first quarter for the first time in more than a year and a half, according to new government figures released Thursday.

According to the Commerce Department’s Bureau of Economic Analysis (BEA), gross domestic product (GDP) grew at an annual rate of 1.6% in the first quarter of this year, lower than the 2.2% expected by economists.

There has been a noticeable downward trend since the GDP growth rate in Q3 2023 reached an astonishingly high rate of 4.9%. This could be a positive sign for the US Federal Reserve. The Federal Reserve wants the economy to remain strong, but not strong enough to keep prices high.

Inflation has started to rise slightly again, reaching 3.5% year-on-year in March, according to the Labor Department’s latest Consumer Price Index (CPI). This was a significant drop from June 2022, when annual inflation exceeded 9%, but was above the central bank’s 2% target.

Unexpectedly high inflation, job market and GDP statistics have extended the Fed’s runway to reduce borrowing costs, with the Central Bank Committee last July pushing borrowing costs from near zero in March 2022 to 5.25-5.55%. % range.

The latest growth report is just one data point the Federal Open Market Committee (FOMC) will consider when it considers whether to cut borrowing costs or likely leave interest rates unchanged at its meeting next week. do not have. On Friday, BEA will also release updated numbers for the Personal Consumption Expenditures (PCE) index, the Fed’s preferred measure of inflation.

The U.S. economy has been surprisingly resilient, adding 303,000 jobs last month alone, and the unemployment rate is on track for the longest streak below 4 percent since the 1960s. And while economists widely predicted a recession a year ago, many now expect the Fed to guide the economy into a rare “soft landing.”

However, high prices remain the top concern for voters in the upcoming 2024 presidential election, and despite President Biden’s appeals to the strength of the economy, stubbornly high prices remain an obstacle to his re-election campaign. It has been proven that there is.