WASHINGTON, April 25 Reuters U.S. economic growth in the first quarter fell below the Federal Reserve39;s estimates of the economy39;s longrun potential for the first time in nearly two years, but the signs of slowing were accompanied with fast inflation that, if sustained, would pose a particular dilemma for the central bank.

Fed officials through much of their battle with a pandemicdriven breakout of inflation said it would take a period of belowtrend growth to bring price pressures fully into line, and the 1.6 rate of expansion registered in the first quarter met that mark after a period where the economy grew faster than the central bank39;s median 1.8 estimate of noninflationary potential.

But prices have remained sticky, with the data on Thursday also showing the personal consumption expenditures price index over the first quarter rising at a 3.4 annual rate versus the Fed39;s 2 target.

Investors and analysts at first blush put more weight on the high inflation figure than on the signs the economy may finally be cooling as the Fed has expected.

Data from the CME Group39;s FedWatch tool showed the probability of an initial Fed rate cut slipping across the board, with a June cut now given less than 10 odds, bets on a September cut slipping below 58, and a second cut in December given less than even odds.

There are reasons to think the 1.6 firstquarter growth rate overstates any weakness in the economy, said Nationwide Financial Market Economist Oren Klachkin,…