US economic growth slows but inflation grows

Source: BBC
 

The US economy grew by less than forecast in the first three months of this year but inflation gathered pace, which could delay an interest rate cut.

Official figures revealed the economy expanded at an annualised rate of 1.6%, far below expectations and the growth seen in the final months of 2023.

Meanwhile, inflation, which measures the pace of price rises, has increased.

At the start of the year, experts had been forecasting a series of interest rate cuts in the US.

However, inflation is yet to fall back to the Federal Reserve's 2% target, and on Thursday, figures from the US Department of Commerce showed that inflation increased by 3.4% in the first three months of 2024. This is compared to an increase of 1.8% in the final three months of 2023.

Raising interest rates makes borrowing - for things such as loans and mortgages - more expensive and theoretically is meant to encourage people to spend less. The idea is that this helps to bring inflation down by dampening demand.

However, US inflation has not fallen back as quickly as expected.