US Economy Grows at Slowest Pace in Nearly Two Years

The US economy grew in Q1 at its slowest pace in nearly two years, with the trade deficit increasing due to a jump in imports to meet still strong consumer spending, but accelerating inflation reinforced expectations that the Federal Reserve would not cut interest rates before September.

Gross domestic product, a broad measure of goods and services produced from January to March, rose at an annual rate of 1.6% when adjusted for seasonality and inflation, according to the department's Bureau of Economic Analysis.

Fixed investment and government spending at the state and local levels helped keep GDP positive during the quarter, while discounting lower investment in private inventory and higher imports.

Excluding food and energy, core PCE prices rose at a rate of 3.7%, well above the Fed's target of 2%. Central bank officials tend to focus on core inflation as a better indicator of long-term trends.

The price index for GDP rose by 3.1%, compared to the Dow Jones estimate for a 3% increase.

Markets are awaiting when the Federal Reserve will start cutting its benchmark interest rate.

He stated that the inflation rate in America is still far from the Federal Reserve’s target of 2%, which supports not reducing interest rates before the last quarter of this year.