The U.S. economy slowed in the first quarter as GDP recorded a tepid rate of 1.1 per cent although data showed consumers kept buying. Read on
The economy’s slowdown reflects the impact of the Federal Reserve’s aggressive drive to tame inflation, with nine interest rate hikes over the past year. The surge in borrowing costs is expected to send the economy into a recession sometime this year. Though inflation has steadily eased from the four-decade high it reached last year, it remains far above the Fed’s two per cent target.The housing market, which is especially vulnerable to higher loan rates, has been battered.
There is widespread skepticism that the Fed will succeed. An economic model used by the Conference Board, a business research group, puts the probability of a U.S. recession over the next year at 99 per cent. Even so, some economists were impressed that spending has held up as well as it has even after nine Fed rate hikes have led to higher costs for loans ranging from mortgages and auto purchases to credit cards and corporate borrowing.
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