Warning of economic magazine about inflation stagnation in America

According to Tasnim news agency, Business Insider warned in a report that the latest data from the US Department of Commerce on the macroeconomics show that the country's economy may be moving towards inflationary stagnation.

This publication further added that these disappointing data indicate “difficult challenges” ahead for the US economy.

Thursday's report also showed that the country's gross domestic product grew at an annual rate of just 1.6 percent in the first quarter of this year, well below forecasts of 2.5 percent.

The slower-than-expected growth of the US economy followed a 3.4% increase recorded in October-December 2023 and a 4.9% increase in the previous quarter.

David Donabedian, chief investment officer at CIBC Bank, told this media: “This report was the worst case scenario (because) slower-than-expected growth is occurring with higher-than-expected inflation.”

According to this report, weak economic growth and rising consumer prices are clear signs of inflationary stagnation, which is characterized by economic slowdown and rising inflation over a long period of time.

The U.S. last experienced a recession in the 1970s, when double-digit inflation occurred as the economy collapsed. The policymakers of this country reacted to this inflationary stagnation by increasing the bank interest rate up to 20% and reduced the prices, but brought the economy into a deeper recession.

In March, the Federal Reserve refrained from raising interest rates, leaving them unchanged between a target range of 5.25% and 5.5%. The next meeting of the Federal Reserve's Open Market Committee is scheduled for May 1.

Meanwhile, the personal consumption expenditures price index, used by the Federal Reserve as a key measure of inflation, rose at an annual pace of 3.4 percent, the biggest jump in a year.

The Bureau of Economic Analysis reported that U.S. consumer spending rose 2.5 percent in January-March, down from 3.3 percent growth in the fourth quarter of 2023 and a decline of 3 percent forecast.

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