U.S. First-Quarter GDP Growth Slows as Core PCE Hits Three-Year High, Challenging Fed

Gross domestic product and the Personal Consumption Expenditures price index, both published by the U.S. Commerce Department, are key gauges of economic activity and inflation. Slower economic growth and rising price pressures in the first quarter, from January through March, have made the Federal Reserve's trade-off between supporting growth and curbing inflation more difficult.

The U.S. economy grew at a 2.0% annualized rate in the first quarter, below market expectations but faster than in the previous quarter. The core PCE inflation rate accelerated to 3.2% year on year in March, its highest level in three years. The conflict in Iran pushed up energy and related costs, hindering progress on inflation and reducing the likelihood of a Fed rate cut in June.