Despite glowing mainstream media reports on personal consumption expenditures and income, the Atlanta Fed GDPNow Model forecast for second quarter GDP did not budge.
Rate hike odds for June shrank substantially.
Latest forecast: 2.9 percent — May 31, 2016
“The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 2.9 percent on May 31, unchanged from May 26. The second-quarter forecast for real consumer spending growth remained at 3.6 percent after this morning’s personal income and outlays release from the U.S. Bureau of Economic Analysis.”
Rate Hike Odds Sink
Despite glowing reports regarding consumer spending rising the most in seven years, not only was the GDPNowcast flat, but the CME Fedwatch rate hike odds fell 9.4 percentage points to 22.5 percent.
As noted in Consumers Come to Life in April; Bounce Less Than Meets the Eye, the widely-touted “biggest jump in consumer spending in nearly seven years” was far from what it seems.
Mike “Mish” Shedlock
– Nope. When I look at ONE chart (and one chart only) then the chances of a rate hike have remained the same or have even increased. Unless that chart “changes its mind” I am currently betting on one rate in june or july.
– Nope.
Yep!
The odds of a hike in June declined over nine percentage points. Period. That may or may not change on Friday.
July will be dependent on all the reports between the June meeting and the July meeting.
Lots of things can happen between June and July. But yes, the odds of a July hike are better then even.
Finally, if you care to do the math, the odds of hike in June or July actually declined 3.5 percentage points from yesterday. So you are wrong on 2 counts.
http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
Mish, just to flush things out. Why in the world is there any risk of a rate hike? How could they at all?
They will do what they want to do.
Things are so screwed up, they have no idea what the free market rate would be now.
I don’t know, and they don’t either.
Mish
These metrics are about as useful as a “magic 8-Ball”
If after sending out their mouthpieces last week to prepare the “markets” for it, if they don’t raise rates in June whatever shred of credibility they actually have left will be completely gone.
Why do they have to hike by 25 basis points at a time? Why not 5 or 10 every month?
I thought they might do 1/8 last time.
Perhaps the hike is 1/8 next time.
At the debt levels we see both on a national and individual basis – I’ll believe rates hikes when I see them.
Otherwise, color me very skeptical.