The U.S. economy grew at an annual rate of only 1.3 percent in the first three months of 2007, the slowest pace in four years, the Associated Press reported.

The fresh reading on gross domestic product, released by the U.S. Commerce Department today, was lower than the 2.5 percent growth rate logged in the final three months of last year. The new figures underscored just how much momentum the economy has been losing as it copes with the strain of the troubled housing market, which has made some businesses more cautious in their spending.

The first-quarter GDP figure was the weakest since a 1.2 percent pace registered in the opening quarter of 2003. An inflation gauge tied to the GDP report showed that core prices, excluding food and energy, rose at a rate of 2.2 percent in the first quarter, up from 1.8 percent in the fourth quarter.

Federal Reserve policymakers say the biggest danger to the economy is if inflation doesn’t recede as they currently predict.

The Federal Open Market Committee hasn’t changed the federal funds rate since August. Before that it had steadily raised that rate to ward off inflation. The Fed’s goal is to slow the economy sufficiently to keep inflation in check, but not so much as to provoke a recession.