Thursday, May 01, 2008

Q1 GDP GROWTH OF 0.6%

According to GDP data released Wednesday, the economy grew at 0.6% in the first quarter of 2008.

From TheStreet.com:

The government reported Wednesday that the U.S. economy grew at a rate of 0.6% in the first quarter of 2008, which was basically in line with expectations on Wall Street.

While GDP growth of 0.6% reflects sluggish activity in the U.S. economy as it muddles through a slowdown in the national housing market and a credit crunch on Wall Street, it also suggests that the nation did avoid recession in the first three months of the year, when many investors were predicting that a recession was underway.

FEDERAL RESERVE CUTS FEDERAL FUNDS RATE

As many expected, the Federal Reserve cuts the Federal Funds rate, the rate at which banks can borrow from the Fed on an overnight basis, by one-quarter point on Wednesday. This may be the last rate cut for some time as concerns over inflation may cause the Federal Reserve to hold rates or even raise them going forward.

From The New York Times:
The Federal Reserve, mixing concern about the feeble economy with worries about rising inflation, reduced short-term interest rates Wednesday for the seventh time since September, while signaling a pause in any additional rate cuts for now.

The Fed’s action brought the federal funds rate — the rate it charges banks for overnight loans — to 2 percent, from 2.25 percent, the lowest level since November 2004. It defended that step as necessary to counter the ailing housing sector and the “considerable stress” shadowing financial markets.

The move followed new indications that the economy remained fragile at best. The Commerce Department reported early Wednesday that the economy expanded only 0.6 percent on an annualized basis in the first three months of 2008, short of an overall downturn but still far from healthy.