The data spell at least a mild stagflationary environment that will make policymaking troublesome.
The slowing growth and stubborn inflation picture emerging in the U.S. economy may not be quite a nightmare scenario for the Federal Reserve, but it at least could make for some restless sleep. First-quarter results released Thursday showed the U.S. economy slugging along at a 1.6% annualized pace, the slowest in almost two years, and inflation running nearly double where it was in the previous quarter and at the highest level in a year.
While there might be some logic in thinking the Fed might view a slowing economy as conducive to easing policy, Ryan said officials likely will be casting a closer look at the personal consumption expenditures price index data, their preferred inflation gauge. During the first quarter, headline PCE rose at an annualized pace of 3.4% for the all-items measure and 3.7% for the core that excludes food and energy costs.
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