The US economy is not growing as fast as expected.

That’s according to data yesterday which showed GDP grew at an annual rate of 1.6% in the first quarter — well below Wall Street’s forecast.

We also saw more evidence the Fed’s inflation battle is nowhere close to won.

For a look under the hood on yesterday’s numbers, I recommend this write-up from Carson Group strategist Sonu Varghese.

Below, we’re unpacking how Fed policy has weighed on everyday Americans.

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Everyday Americans are left to deal with the Fed’s high rates

Federal Reserve policy hasn’t worked as expected.

Given a string of hot inflation data, higher-for-longer rates seem like a certainty at this point.

Jerome Powell said as much two weeks ago.

There’s simply little reason to loosen policy:

• Inflation is sticky and elevated

• The labor market won’t quit

• Stocks and crypto have largely crushed it in the first quarter

• Credit spreads remain narrow, which means it’s relatively easy for companies to borrow cash

Some economists see these bullets as reason to believe the Fed’s next move is a hike rather than a cut.

As of Thursday, markets see the most likely scenario being zero cuts for 2024, according to Kalshi.

That’s down from seven at the start of the year.

So tight policy hasn’t tamed inflation like the Fed said it would.

But it has seeped into the lives of everyday Americans in the form of rising delinquency rates.

“The move by the Fed to tighten up interest rates has been a disaster for consumers tied to APR or short-term rates,” David Daglio, the CIO of TwinFocus, told me.

Goldman Sachs data shows delinquency rates for subprime auto loans, for one, are hovering at levels last seen in 2008.

Meanwhile, data from the New York Fed showed credit card balances grew by $50 billion in the fourth quarter of 2023 — nearly 15% higher than one year before.

Separate figures from the Philly Fed showed credit-card delinquency rates that quarter hit the highest level on record.

“Delinquencies began to go in the wrong direction almost simultaneously with the change in [Fed] interest rates,” Daglio said.

While consumer spending has so far proved robust through the Fed’s rate-hiking cycle, the rise in delinquencies tell a different story.

Particularly among lower-income families.

Roughly 13% of balances among those households are transitioning to delinquency, compared to about 4.5% for high earners, NY Fed data shows.

If higher for longer rates persist as markets now think, Daglio says it wouldn’t surprise him if delinquencies climbed as the year goes on:

“My hunch is the consumer slows down much more than expected over the next few months because people are more levered than they should be.”

*At a glance:

Elsewhere:

• The Fed’s preferred inflation gauge is due today. The stakes are high for this report. Dow Jones economists expect headline PCE grew 0.3% from the prior month. (Morningstar)

• Google and Microsoft posted better-than-expected earnings. Those results helped fuel a broader market rally after hours after the major indexes finished in the red on Thursday. (CNBC)

• The dream for 2024 Fed cuts is dwindling. Investors have pulled back expectations for a policy adjustment this year. That could bode poorly for a stock market that’s largely rallied on optimism for cuts. (WSJ)

Rapid-fire headlines:

• Stagflation could be looming, and that’s worse than a recession (Business Insider)

• Bond market demand shows traders expect higher-for-longer (Barron’s)

• Alphabet stock surged after announcing dividends (WSJ)

• Zuck is investing in a future only he can see (Opening Bell Daily)

Last thing:

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