Economic Slowdown and Inflation: What It Means for the US Economy and the Federal Reserve’s Decision-Making

The U.S. economy has experienced a slowdown in the first quarter of 2024 as the GDP growth rate fell below 2% for the first time in over a year and a half, according to new government data released on Thursday. This is a noticeable decline from the 4.9% GDP growth rate seen in the third quarter of 2023, but it could be viewed as a positive sign for the Federal Reserve, which aims to maintain a strong economy without keeping prices too high.

Inflation has also been on the rise, with the latest consumer price index (CPI) data from the Labor Department showing an increase to 3.5% year-over-year in March. While this is lower than the peak it reached in June 2022, it is still above the Federal Reserve’s target of 2%.

The unexpected rise in inflation, along with data on job growth and GDP, 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.

The Federal Open Market Committee (FOMC) will review this latest economic report and other indicators when they meet next week to determine whether they will lower borrowing costs or maintain them. They will also consider new data on the Fed’s preferred inflation index, the personal consumption expenditures (PCE) index, set to be released on Friday.

Despite concerns about high prices, the U.S. economy has shown resilience with job growth and prolonged periods of low unemployment rates below 4%, which is currently at its longest streak since the 1960s. While many now anticipate that President Biden will guide his reelection campaign towards a rare “soft landing” instead of recession prediction made by economists last year, elevated prices continue to be a major concern for voters heading into