Sluggish GDP Growth May Bring a Rate Cut The government's latest estimate on the GDP — gross domestic product is 0.6 percent, the second in a row of slight growth. That allows the economy to skirt the classic definition of recession. But it still points to an overall slowdown, which may prompt the Federal Reserve to cut interest rates again today.
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Sluggish GDP Growth May Bring a Rate Cut

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Sluggish GDP Growth May Bring a Rate Cut

Sluggish GDP Growth May Bring a Rate Cut

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STEVE INSKEEP, host:

NPR's business news starts with an economy just barely growing.

Nobody would have been that surprised if today's numbers showed an economy that was shrinking. The latest figures show the gross domestic product - that's the total value of goods and services produced, everything from autos made to fingernails manicured at a salon someplace - and the latest estimates show the economy increasing ever so slightly. To help give it a greater boost, the Federal Reserve this afternoon is expected to cut interest rates. We have more this morning from NPR's Chris Arnold.

CHRIS ARNOLD: The Federal Reserve has already cut interest rates by three percentage points since last September. That should stimulate the economy. It's supposed to make many mortgages and car loans more affordable and basically encourage people to spend money. Another quarter point rate cut is likely, but that may be the last one for a while.

Mr. STUART HOFFMAN (Economist, PNC Financial Services): Well, the danger is always that there's an inflation backlash. And we're having more inflation than the markets feel comfortable with right now.

ARNOLD: Stuart Hoffman is chief economist with PNC Financial Services. He says higher energy and food prices are putting a drag on the economy. Earlier this morning the Commerce Department as expected reported an anemic rate of growth of 0.6 percent. And even though the numbers don't show it yet, Hoffman believes the country is already in a recession. The only question is how severe.

Mr. HOFFMAN: That is probably more the question. Not whether we are or not in a recession, but you know, how broad and how deep or severe could it be.

ARNOLD: Hoffman thinks it will be a mild one. But he says energy prices, the ongoing housing downturn, and a very stretched American consumer will still keep the economy in a pretty low gear for at least the next 12 months.

Chris Arnold, NPR News.

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