Growth in the world's largest economy slowed to 1.6 percent from 3.4 percent in the fourth quarter. This is an annual figure. This means that growth is artificially stretched from quarter to quarter as if it had been at that level for an entire year. Under the methodology used in Europe, growth in the US would have been 0.4 percent in the first quarter.
On average, economists forecast an increase of 2.5 percent. Economic growth is key to the US Federal Reserve's interest rate policy. If the economy cools sharply, the central bank may be more inclined to cut interest rates to stimulate the economy. With strong growth, the central bank can keep interest rates high for longer.
Interest reduction will come
The slowdown in growth is partly related to weak consumer spending, the engine of the US economy, and weak exports. The US government will later release new estimates for growth in the first quarter.
In financial markets, the central bank is expected to make its first interest rate cut later this year, in September, now that inflation is slowing.
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