President Joe Biden’s hot streak of success on the economy hit an unexpected detour Thursday, as a government report showed growth was slower than forecast and prices higher.

GDP grew at a 1.6 percent pace in the first three months of the year — less than half the pace of the previous quarter and far slower than economists had predicted — with a particular drag coming from the trade deficit as a strong dollar hurt exports.

The report comes as the Federal Reserve is actively trying to slow the economy in its bid to tame price spikes, but a potentially troubling trend is that progress toward the central bank’s 2 percent inflation target has also stalled after making considerable headway in 2023. That bolsters the case for the Fed to hold off on interest rate cuts, keeping pressure on the economy, and also gives Republicans a fresh talking point in an election year.

The big question now is what this report suggests will happen going forward. The worst-case scenario for Biden would be for the economy to continue to slow while inflation stays elevated — a phenomenon known as stagflation. Based on Thursday’s snapshot of the economy, that looks like a possibility, given that inflation, as measured by the personal consumption expenditures index, rose 3.7 percent in the first quarter even as GDP growth slowed.

But the jobs market has remained solid, and spending and investment, the underlying engines of growth, are still strong, even as Americans have slowed down in their purchases of goods.

“This report pours cold water on the misleading narratives of a reaccelerating economy,” EY chief economist Gregory Daco said. “As we enter the spring, the underlying growth mix continues to signal robust momentum, but demand growth is gently cooling leading to easing inflationary pressures.”

Ernie Tedeschi, who served as chief economist to Biden’s Council of Economic Advisers until last month, sees room for optimism, noting that the economy grew at a 3.1 percent rate measured by consumption and fixed investment.

“I don’t think the output side of the report changes much of anything that we thought about the trend in the economy,” he said, though he acknowledged the inflation data was worrying.

Unemployment is still low, and if inflation continues to come in stubbornly above 2 percent, the Fed will keep rates at their current elevated levels.

The central bank’s rate-setting committee convenes next week for another decision on interest rates, where the members are expected to hold borrowing costs steady. Fed Chair Jerome Powell signaled last week that a rate cut might not come in June either, citing “a lack of further progress so far this year” on reaching its inflation goal.

Thursday’s data is unlikely to significantly shift their thinking, as the underlying spending that feeds into prices is still strong. But if flagging growth ultimately leads to a rise in joblessness, that could spur the Fed to cut rates sooner.

In the meantime, the GDP number provides fodder for Republicans hoping to hit the president on the economy, which offered them few such openings in the latter half of 2023. House Budget Chair Jodey Arrington (R-Texas) called 1.6 percent growth “shockingly low.”