The consistent hikes in interest rates by the Federal Reserve – 11 increases since May 2022 – and the resulting higher-than-normal rates may be having an effect on the nation’s economy.
Reports show the nation’s economy slowed last quarter, growing at an annual rate of 1.6%, indicating the rates may be affecting borrowing and spending.
Thursday’s report from the Commerce Department said the gross domestic product — the economy’s total output of goods and services — decelerated from its brisk 3.4% growth rate in the final three months of 2023, according to a report from The Associated Press. Consumers continued to drive growth in the January-March quarter but slowed their spending.
Although inflation has slowed sharply, to 3.5% from 9.1% in 2022, prices remain well above their pre-pandemic levels.
The economy’s gradual slowdown reflects the much higher borrowing rates for home and auto loans, credit cards and many business loans.
Despite that, the United States has continued to outpace the rest of the world’s advanced economies. The International Monetary Fund has projected that the world’s largest economy will grow 2.7% for all of 2024, up from 2.5% last year and more than double the growth the IMF expects this year for Germany, France, Italy, Japan, the United Kingdom and Canada, the AP reported.
Kristalina Georgieva, the IMF’s managing director, cautioned last week that the “flipside″ of strong U.S. economic growth was that it was ”taking longer than expected” for inflation to reach the Fed’s 2% target, although price pressures have sharply slowed from their mid-2022 peak, according to the AP.
