Shrinking GDP and elevated inflation put Fed in tough spot

The Federal Reserve is in a tough spot following new data Wednesday reinforcing slower economic growth and higher inflation during the first quarter, a combination that may eventually force the central bank to choose between its dual goals of maximizing employment and maintaining price stability.

"It was still a stagflation warning shot over the bow of the economy," Morgan Stanley Wealth Management chief economic strategist Ellen Zentner said. "This type of data won't soothe the markets, and it won't make the Fed's job any easier."

The US economy contracted for the first time in three years to start 2025 as a surge in imports dragged down GDP and prices increased more than forecast.

Luke Tilley, chief economist at Wilmington Trust, expects the US economy to slip into a recession in the second quarter with another contraction in growth.

https://finance.yahoo.com/news/shrinking-gdp-and-elevated-inflation-put-fed-in-tough-spot-142211609.html