The U.S. economy experienced a slight slowdown during the first quarter of the year, with economic growth falling below 2 percent for the first time in over 18 months. According to data released by the Commerce Department’s Bureau of Economic Analysis, Gross Domestic Product (GDP) grew at an annualized rate of 1.6 percent, lower than the 2.2 percent predicted by economists.
After a strong GDP growth of 4.9 percent in the third quarter of 2023, there has been a noticeable downward trend in the economy. This could be viewed as a positive development for the Federal Reserve, which aims for a strong yet stable economy to prevent high inflation rates. Inflation has slightly increased to 3.5 percent year over year in March, above the central bank’s 2 percent target.
The recent economic data, including inflation, job market indicators, and GDP growth, have given the Federal Reserve more flexibility to adjust borrowing costs. The Fed had raised interest rates to a range of 5.25 percent to 5.5 percent last July from near 0 percent in March 2022. The upcoming meeting of the Federal Open Market Committee will consider whether to lower borrowing costs or maintain current rates.
Despite concerns about inflation, the U.S. economy has shown resilience, with added 303,000 jobs in recent months and an unemployment rate below 4 percent, the lowest since the 1960s. Economists who previously predicted a recession now anticipate the Fed to guide the economy towards a rare “soft landing.” However, high prices remain a significant issue for voters in the upcoming 2024 presidential election and present a challenge for President Biden’s reelection campaign, despite the strong economic performance.