Atlanta Fed Slashes Q1 GDP Forecast To Just 0.9% Hours Before Fed Rate Hike
While it may not be the very definition of irony, we do find the fact that the Atlanta Fed has just cut its Q1 GDP forecast from 1.2% to 0.9%, a number which if confirmed would be the lowest quarterly print in year, just two hours before the Fed’s rate hike quite humorous. As a reminder, the number was as high as 3.4% one and a half months ago.
From the Atlanta Fed:
Latest forecast: 0.9 percent — March 15, 2017
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is 0.9 percent on March 15, down from 1.2 percent on March 8. The GDP growth forecast declined 0.3 percentage points on Friday when the February estimate of the model’s latent dynamic factor used to forecast yet-to-be released GDP source data declined after the employment situation release from the U.S. Bureau of Labor Statistics (BLS). The forecast for first-quarter real consumer spending growth inched down from 1.6 percent to 1.5 percent after this morning’s retail sales report from the U.S. Census Bureau and the Consumer Price Index release from the BLS.
The chart below reveals that the worse the economy was doing, the higher the odds of a rate hike.
Putting the Atlanta Fed’s forecast in context, 0.9% GDP would mark the weakest quarter since 1987 in which rates were raised, according to Julian Emanuel at UBS.
And since the Fed is hardly raising rates in light of the ongoing slowdown in the economy, one can only assume that the reason for the Fed’s hike is to put the breaks on runaway inflation and/or various asset bubbles.