WASHINGTON, Apr 26 (Reuters): The US economy grew at its slowest pace in nearly two years in the first quarter amid some moderation in consumer spending and a wider trade deficit, but an acceleration in inflation reinforced expectations that the Federal Reserve would not cut interest rates before September.
The cooler-than-expected growth reported by the Commerce Department in its snapshot of first-quarter gross domestic product on Thursday also reflected a slower pace of inventory accumulation by businesses and a downshift in government spending. Still, domestic demand remained solid, underpinned by business investment and a recovering housing market.
"This report comes in with mixed messages," said Olu Sonola, head of economic research at Fitch. "If growth continues to slowly decelerate, but inflation strongly takes off again in the wrong direction, the expectation of a Fed interest rate cut in 2024 is starting to look increasingly more out of reach."
Gross domestic product increased at a 1.6 per cent annualized rate last quarter, the slowest pace since the second quarter of 2022, the Commerce Department's Bureau of Economic Analysis said. Economists polled by Reuters had forecast GDP rising at a 2.4 per cent rate, with estimates ranging from a 1.0 per cent pace to a 3.1 per cent rate.
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