NEW YORK: The dollar rose on Thursday as weaker-than-expected US economic growth in the first quarter is not likely to deter the Federal Reserve from raising interest rates next week.

The advance estimate of first-quarter gross domestic product (GDP) showed a 1.1% annualized rate during the period. The economy grew at a 2.6% pace in the fourth quarter. Economists polled by Reuters had forecast GDP rising at a 2.0% rate.

However, investors focused on the quarterly inflation number within the GDP report. Core personal consumption expenditure prices rose 4.9% in the first three months of the year, higher than the consensus figure of 4.7% and up from the fourth quarter figure.

“The knee-jerk reaction was to sell the dollar because yields turned lower after the weaker-than-expected GDP, but the market seemingly wanted to focus on the higher quarterly core PCE number,” said Erik Bregar, director, FX and precious metals risk management at Silver Gold Bull in Toronto.

He added that the weak GDP, especially with the higher core PCE, should not prevent the Fed from raising rates by 25 basis points at next week’s policy meeting. Markets have priced in an 88% probability of that rate increase for May.

A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits decreased 16,000 to a seasonally adjusted 230,000 for the week ending April 22. Economists had expected 248,000 claims in the latest week.