Fed policymakers expressed hope that its powerful series of rate reductions will spur better growth over time. They noted that economic activity was continuing to expand, partly reflecting "some firming in household spending."

The government's tax rebates, the centerpiece of a $168 billion stimulus package, have helped to energize consumer spending in recent months.

If lucky, the Fed will be able to leave rates where they are for a while so that the economy can gain traction. However, some believe the Fed might be forced to boost rates later this year to fend off inflation.

Others think the Fed won't start to push up rates until next year. Either way, the Fed's next move on rates is likely to be up — not down, analysts said. The timing will hinge on how energy and food prices, as well as other inflation barometers, behave in the months ahead.

There's been a lot of talk about whether the country has fallen into a recession. The new GDP statistics did not meet what analysts consider one definition of a recession — two straight quarters of shrinking economic activity. But that didn't happen in the last recession in 2001, either. And other barometers — nationwide job losses and shriveling paychecks — have pointed to a possible downturn.

Some analysts believe the economy in the current April-to-June quarter is growing at a pace of just over 1 percent. With consumers recently showing an improved appetite to spend, some analysts now think the second quarter will perform better than earlier estimates for little, if any, growth for the quarter. At one point, some thought the economy might actually contract.

Fallout from the housing crisis continued to be a big drag on overall economic growth: builders slashed spending on housing projects in the first quarter by 24.6 percent on an annualized basis. That wasn't as deep, though, as the 25.2 percent annualized cut made in the fourth quarter.