Brokers are concerned about the current market conditions, as high inflation combined with potential job losses could lead to stagflation. Mike Fratantoni, senior vice president and chief economist of the Mortgage Bankers Association, believes the Fed must balance economic headwinds against inflationary pressure. “The quandary facing the Federal Reserve is that while the trend in the data is clearly showing a slowing economy, it also renewed upward pressure on inflation,” Fratantoni said.

“We expect that the Fed will hold rates steady at its meeting next week and will indicate that it will continue to hold at this level until it becomes clear whether a recession or inflation is the bigger risk.” Imports weigh down GDP Imports, which are subtracted in the GDP calculation, were a major factor in the decline, while government spending also weighed against the economy. “Economic growth went negative in the first quarter as businesses rushed to import goods before tariffs went into effect,” Fratantoni said. “In addition to the pullback in activity, the inflation metrics increased relative to the prior quarter, so both growth and inflation were headed in the wrong direction.”