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Economy

US economy grows by 3.2 percent, beating expectations

The Trump administration warned the Federal Reserve not to raise interest rates

Spencer Platt/Getty Images

The United States economy grew by 3.2 percent in the first quarter of 2019, beating expectations.

What's the story?

According to a news release from the U.S. Commerce Department's Bureau of Economic Analysis, "The increase in real GDP in the first quarter reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, state and local government spending, and nonresidential fixed investment."

For comparison, growth in the last quarter of 2018 was 2.2 percent.

According to the BEA, a 3.2 percent increase is equivalent to $197.6 billion. Economists had predicted that the growth would be around 2.3 percent.

However, the BEA notes that some of this growth is due to companies adding inventory, a factor that economists warn is not sustainable. The trade deficit has also narrowed, which increases the gross domestic product but has been steadily increasing during the Trump administration.

Trump admin. warns Fed against raising rates

Larry Kudlow, director of the National Economic Council, went on CNBC on Friday morning and said he believed that the federal reserve should lower interest rates in light of this news. Kudlow said that the economy was in a "prosperity cycle" and was "gaining momentum, not losing momentum."

The Federal Reserve periodically raises interest rates during periods of economic growth to prevent inflation from getting out of control. As the economy has improved over the past few years, the Fed has periodically raised rates slightly.

President Donald Trump has repeatedly criticized the Federal Reserve for raising interest rates. However, the Fed has made it a point to be independent after allowing Richard Nixon to influence rates.

"The inflation rate continues to slip lower and lower," Kudlow said on CNBC's "Squawk on the Street." "Even according to the Fed's own spokespeople, from the chairman on down, that could open the door to a target rate reduction."

One last thing…
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