The U.S. economy grew at a slower pace than expected in the first quarter of 2024, but inflation remained high, suggesting that the Federal Reserve would not cut interest rates before September.
The Commerce Department reported that gross domestic product (GDP) increased at an annualized rate of 1.6% in the first quarter. This was lower than the 2.4% growth rate that economists had forecast.
Consumer spending was the main driver of growth in the first quarter. However, inflation also accelerated, rising at an annualized rate of 3.5%. This was higher than the 2.9% rate that economists had expected.
The Federal Reserve has been raising interest rates in an effort to combat inflation. However, the central bank has signaled that it will likely pause its rate hikes in the coming months.
The International Monetary Fund (IMF) recently upgraded its forecast for U.S. growth in 2024 to 2.7%. This is up from the 2.1% that the IMF had projected in January. The IMF cited stronger-than-expected employment and consumer spending as reasons for its revised forecast.
The U.S. economy has defied expectations of a recession in recent months. This is due in part to the fact that consumers locked in lower mortgage rates before the Fed began raising interest rates. Businesses have also refinanced debt, which has helped to boost economic activity.