Sluggish GDP Growth May Bring a Rate Cut
The government's latest estimate on the GDP — gross domestic product — shows an economy barely managing to grow. The quarterly GDP of 0.6 percent, the second in a row of slight growth, allows the economy to skirt the classic definition of recession. But it still points to an overall slowdown.
To boost the economy, the Federal Reserve this afternoon is expected to cut interest rates.
The Federal Reserve has already cut interest rates by 3 percentage points since last September. Those cuts were aimed at stimulating the economy by making many mortgages and car loans more affordable, freeing consumers to spend more money.
Another rate cut is likely. But that may be the last one for a while, analysts say.
"The danger is always that there's an inflation backlash," said Stuart Hoffman, chief economist at PNC Financial Services. "And we're having more inflation than the markets feel comfortable with right now."
Hoffman says energy prices, the ongoing housing downturn, and stressed American consumers will still keep the economy in a pretty low gear for at least the next 12 months.
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