In the first quarter of 2023, the U.S. economic growth rate fell below 2 percent for the first time in over a year and a half, according to a new government report released on Thursday. Gross domestic product (GDP) expanded at an annualized rate of 1.6 percent, lower than the 2.2 percent that economists had predicted. This downward trend could be seen as a positive indicator for the Federal Reserve, as they aim for a strong economy without keeping prices too high.
The unexpected rise in inflation has given the Federal Reserve room to potentially lower borrowing costs. The central bank committee had raised borrowing costs to a range of 5.25 to 5.5 percent in July after maintaining near-zero rates in March 2022.
Despite concerns over high prices, the U.S. economy has shown resilience with the addition of 303,000 jobs last month and a prolonged period of unemployment rates below 4 percent, the longest such streak since the 1960s.
The Federal Open Market Committee (FOMC) will review the latest growth report and other economic indicators when they meet next week to determine whether they will lower borrowing costs or maintain them.
Elevated prices continue to be a major worry for voters in the upcoming 2024 presidential election, posing a challenge for President Biden’s reelection campaign even as he touts the strength of the economy.
According to recent data from consumer price index (CPI), inflation has slightly increased to 3.5 percent year-over-year but is below peak it reached in June 2022 and within central bank’s target range.
While many now anticipate the Fed to guide the economy towards a rare “soft landing,” some experts warn that this could still lead to recession if not managed carefully.
Overall, while there are challenges ahead for both policymakers and voters alike, there is hope that through careful management of borrowing costs and inflationary pressures, America can continue its economic growth trajectory while also addressing rising prices concerns effectively.
