Slow GDP growth could mean the Fed may start cutting rates, but the report had some bad news|Giphy
The GDP numbers came out yesterday, and the latest data tell a confusing story.
The first quarter saw a 1.6% annualized growth rate, below the 2.4% estimate and much below the 3.4% gain in the last quarter of 2023. While de-accelerated growth could mean that the Fed may start cutting rates, the report had some bad news inflation-wise.
Personal consumption expenditures rose at a 3.4% annualized pace for the quarter, and the core PCE—excluding food and energy—rose to 3.7%, well above the Fed’s 2% target.
The confounding numbers are confusing economists and analysts.
Also
The job market remains strong, with unemployment benefit claims reaching their lowest levels in the past two months. Plus, consumers are spending more than they did last year, say credit card companies like Visa.
Experts are cautious
In a recent interview, JPMorgan CEO Jamie Dimon said the odds of a successful soft landing are at less than 50%. He compared the current economic scenario to the 1970s. “Things looked pretty rosy in 1972—they were not rosy in 1973.”
In the 1970s, the oil crisis sent inflation soaring, and a recession took hold, a situation known as stagflation.
He also pointed out that the $2 trillion fiscal deficit could impact the economy till 2026.
What about rate cuts?
The central bank is unsure if and when it will cut rates, which are their highest ever in 23 years, ranging between 5.25% to 5.5%.
The Commerce Department is set to release its March inflation figures on Friday.