The U.S. economy entered 2018 with strong momentum, but it slowed in the first quarter. The advance estimate of 2.3% real gross domestic product (GDP) growth in the quarter trailed previous quarters. Higher, above-potential growth is expected throughout the rest of 2018 and into 2019, given the underlying fundamentals—a tight labor market and robust consumer expectations—appear strong.
Recent data show that headline personal consumption expenditures (PCE) inflation reached 2% year over year in March, matching the Federal Reserve’s target and up from 1.7% in February. Core inflation also advanced in March to 1.9% year over year from 1.6% in February. Still, long-term inflation expectations remain firmly anchored.