The GDP outlook for 2023 is unquestionably downbeat too, with some forecasters putting the probability of recession at 60% or greater. The economy expanded at an annual rate of 1.3% during the first three months of 2023, down from the 2.6% growth seen in the final quarter of 2022. Gross domestic product decelerated once again in the first quarter, hurt by high inflation, rising interest rates and turmoil in the banking sector. "The Fed statement is pretty clear: we are not done yet."Īnd then there's the bigger picture. "The outlook for two additional hikes this year exceeded the one hike expected and lessens the positive impact of a decline in headline CPI while putting the focus squarely on the stickier core number," says Steve Wyett, chief investment strategist at BOK Financial. The slower rate of inflation, which came in below economists' expectations, should theoretically give the Federal Reserve room to pause its long campaign of interest rate hikes.īut experts say the CPI report and other data hardly give the Fed a slam-dunk case for putting rate hikes on permanent hold. Core CPI, which excludes volatile food and energy prices, remains stubbornly elevated, they note. Inflation cooled once again in May, with prices rising at the slowest pace in more than two years, according to the CPI report. Meanwhile, the economic data aren't conclusively helping the case for lower interest rates – even as rate increases put stress on the banking sector and threaten to push the economy into recession.
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