U.S. Growth Falters, Giving Feds Reason To Delay Rate Cuts

US economic growth experienced a significant slowdown last quarter, dropping to an almost two-year low, while core inflation surged to 3.7%, interrupting a trend of robust demand and subdued price pressures.

Federal Reserve policymakers may now encounter renewed pressure to postpone any rate cuts further and consider whether borrowing costs are adequately high.

The government's initial estimate revealed that Gross Domestic Product (GDP) increased at a 1.6% annualized rate, falling below all economists' forecasts, as reported by Molly Smith for Bloomberg News.

Federal Reserve policymakers, who were already anticipated to maintain interest rates at a two-decade high in their upcoming meeting, may now encounter renewed pressure to postpone any rate cuts further and consider whether borrowing costs are adequately high.

Personal spending, the economy's main growth driver, expanded at a slower-than-expected 2.5% pace.

Moreover, a widening trade deficit deducted the most from growth since 2022, disrupting the previous trend of robust demand and muted price pressures, which had fostered optimism for a soft landing.