The San Francisco Fed Just Gave A Green Light For A June Rate Hike

Tyler Durden's picture

Back on March 3, it was none other than a Federal Reserve bank, that of Atlanta, which as we first reported shocked the world or at least those permabullish, consensus-chasing, Wall Street weathermen-cum- economists who assume that a world with $200 trillion in debt will grow at the same CAGR as a world without 4 times global GDP in leverage, when it urgently warned that the Q1 consensus GDP estimate was very wrong.


The Atlanta Fed turned out to be spot on, with its 0.1% forecast relative to the 0.2% first estimate print by the BEA, and in fact, following subsequent revisions which now anticipate Q1 GDP to crash to -1.2%, will show Atlanta Fed, which has Q2 GDP at 0.7%, to have been optimistic.

Perhaps because it was unhappy with the Atlanta Fed hogging all the economic spotlight in 2015, none other than Janet Yellen's own Fed, San Francisco's, moments ago came out with a paper authored by that inimitiable economist Glenn Rudebusch, which seeks to resolve "The Puzzle of Weak First-Quarter GDP Growth" and blames it all on, drumroll, seasonal adjustments, or rather not enough:

The official estimate of real GDP growth for the first three months of 2015 was shockingly weak. However, such estimates in the past appear to have understated first-quarter growth fairly consistently, even though they are adjusted to try to account for seasonal patterns. Applying a second round of seasonal adjustment corrects this residual seasonality. After this correction, aggregate output grew much faster in the first quarter than reported.

You can read the full surreal piece here, but the punchline is the following - if the unadjusted data, or even the seasonally adjusted data sucks, what do you do? You "double" seasonally adjust it.

No, seriously:

Quote the authors:

Figure 4 shows recent real GDP growth—both the BEA’s published seasonally adjusted data in red and our double seasonally adjusted version in  blue. The application of second-round seasonal adjustment increases real GDP growth in the first quarter of 2015 from its initial published value of 0.2% to 1.8%. Taking this correction at face value, real GDP growth in the first quarter was stronger and much closer to the economy’s sustainable rate of trend growth.

And if the double seasonally adjusted data doesn't work? Why triple adjust it, then quadruple adjust it, until you get precisely the goalseeked number you want, as US economic "data" promptly devolve to a level of ridiculousness that will make even the Chinese Department of Truth turn green with envy.

That this is sheer idiocy has been clear to Zero Hedge readers for years. In fact, the stupidity behind the spin and goal seeking of "data" has even become clear to the self-appointed Keynesian mouthpiece trolls:

But that's not the punchline: the punchline is that since San Fran Fed's Glenn "double seasonal adjustment" Rudebusch is one of Yellen's favorite hometown economists, she now has the green light to completely ignore the weakest economic print since last Q1, and to focus entirely on the best economic print in the US: the surge in part-time senior citizen workers, pardon, the "zero slack" unemployment rate of 5.4%.

She also has the justification why to ignore it: the bad data wasn't seasonally adjusted enough (the good data was seasonally-adjusted just right).

Which may well mean that the Fed, which so urgently wants to hike rates just so it sends the US stock market and the economy, into a repressionary tailspin to be then granted permission to engage in QE4, just to "Trichet" itself, may very well hike rates next month, just as the entire consensus coterie of clueless Wall Street weathermen say there is zero chance of a Fed rate hike in June.

Source: San Fran Fed

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LawsofPhysics's picture

Oh yes, please, go ahead and hike those rates!!!   (LOL!!!)

wake me when we are back about 4% on the ten year.

Now, regarding the Fed's balance sheet...

Newsboy's picture

Yeah, the Fed will buy everything in the world, "expanding it's balance sheet" to help us all.

Then, for the investment of conjured digital fiat currency, it will awkwardly find itself owning evereything in the world.

Of course the invisible shareholders of the share-holding banks would have to decide what to allow the rest of the humans to do to survive, and it might involve killing the dislyoal humans...

Headbanger's picture

No it's not

The Feral Reserve is going into full survival mode now and has had it with propping up the economy for all the ass hats in DC.

And look for another "666" sell signal soon.


espirit's picture

Kabuki theater.

"Buy moar before the rate hike". 

knukles's picture

Can I get a colonoscopy with that rate hike?
Great!  Gimme 2 and another to go!

MonetaryApostate's picture

Locn n load people, those ignorant masses aren't going to be happy, not one iota, and if you can't see what will follow then all of your time on ZH has been wasted.

Squid-puppets a-go-go's picture

i thought it was 'zero slacks' - they work for such a pittance they cant afford to buy trousers

Ham-bone's picture

Implications of rate hikes on Federal debt in the last two charts...obviously, corporations and the rest of the interest rate sensitive economy will not be good.

KnuckleDragger-X's picture

Yep, the FED know's the shit is getting ready to fly and is hoping nobody notices they are the chief instigator in the coming collapse. This time it'll be too big a disaster to be able to bail anybody out, so Yellen is going for "innocent bystander".....

walküre's picture

As long as Yellen & Co. come out alive and well on the other side, it makes sense - for them.

She said "valuations are high" which means, she and her friends are not buying anymore of this crap. They want to buy on the cheap and frankly, so do I.

Please Yellen, raise rates and faster than anyone is anticipating. My cash is getting dusty.

walküre's picture

As long as Yellen & Co. come out alive and well on the other side, it makes sense - for them.

She said "valuations are high" which means, she and her friends are not buying anymore of this crap. They want to buy on the cheap and frankly, so do I. If you can't fight 'em you have to join 'em.

Please Yellen, raise rates and faster than anyone is anticipating. My cash is getting dusty.

i_call_you_my_base's picture

I bought a bunch of beanie babies in anticipation of offloading them on the fed.

insanelysane's picture

This is what happens at the Fed when the internet goes down and the "economists" can't surf porn.  They start fooling around with Excel.

Butterflying's picture
Butterflying (not verified) LawsofPhysics May 18, 2015 3:27 PM

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do...

saints51's picture

September sure is lining up to be a bumpy ride. Crude getting smacked down right now right before pit close. Let us see if they can get a last minute low volume melt up.

saints51's picture

They love doing this shit. It is the new 330pm ramp. Eventually it will bottom out and bankrupt majority of the players in Shale.

froze25's picture

Wow, you called it on the melt up.  How is the volume, I cannot see it?

saints51's picture

The volume did increase so I was wrong about that. This game is really easy to make money in. I just read Goldman said the markets were going nowhere on CNBC. Well now I know they are going to move. They love pillaging muppets.

NoDebt's picture

I prefer "Olymic judging" methodology- throw out the highest and lowest and average the rest.


Arius.'s picture
Arius. (not verified) May 18, 2015 1:15 PM

( Alliance News ) - Federal Reserve Bank of Chicago President Charles Evans said it will not be appropriate to start raising the fed funds rate until sometime in early 2016.


Confused ...

GeezerGeek's picture

So we have the Chicago Fed and the SF Fed in opposition to one another. What can I do to get them together for a good old-fashioned shootout like just happened in Texas between biker gangs? Banker gangs, biker gangs, more or less the same to me. Nine dead bankers and another hundred arrested would put a smile on my face.

Budnacho's picture

Chicago vs. Frisco? contest unless the San Franciscans begin to run....the weight of Deep-Dish-Pizza will slow anyone....

Arius.'s picture
Arius. (not verified) Budnacho May 18, 2015 4:05 PM

Which one made it to ZH?  my bet is on SF winning this round ... june hike

MFL8240's picture

The game is getting more and more  out of control.  They will lie, steal and say whatever you want to hear as the wheels continue to loosen on the Ponzi Train!  We can now chaulk the US to their list of countries they have taken over the money and destyroyed.  Germany was a lessen for all and no one got the message.

Son of Loki's picture

I was amazed at the number of cars broken down by the side of the highway when driving along this weekend. It almost outnumbers the number of homeless begging for money under the highway at intersections.


I wonder if they build "Hobo Cities" if the rent will be affordable?

Salah's picture

Remember in the Cold War, how high i-rates were?  What was the implicit message to "America's allies" (i.e. Europe, Asia, SA, MENA, et al).... "it pays to stick with the winner!" (of WW2).  And this was before Nixon shut the gold window, which boosted them even more.  It was a true multi-polar world.

What happens when this faux global uni-polar world is revealed as a sham and the multi-polar world re-emerges? 

froze25's picture

I totally get what you are saying, It will be int interesting times for the younger side of the population.  As for the older side I hope you are happy with the shit pile you left us from not speaking out and playing the Red Team vs Blue team game.

GeezerGeek's picture

Naysayers aren't popular, as I've learned while speaking out against government idiocy since Nixon imposed wage and price controls, severed the link between gold and FRN, etc. No one wanted to listen to me. Heck, I remember wondering WTF (although that was not how one said it back then) when Kennedy ran a $1 billion deficit. No one, outside of a few fringe web sites, wants to listen now. It's so much easier to bury one's head in the sand and pretend everything is fine. Meanwhile, enjoy the shit pile. In fact, embrace it. And when they come to take you to a reeducation camp to get those nasty ZHer thoughts purged, give them a hug and hope some shit rubs off on your oppressors.

SheepDog-One's picture

Did we just quit when the Germans bombed Pearl Harbor? HELL NO!

DetectiveStern's picture

Who the fuck thinks an increase in old people working in bars and restaurants in anyway a good thing.

I want perk with my pint not knee nipples with my gnocchi.

i_call_you_my_base's picture

If the data doesn't hit your expectations, you readjust the data? I must have skipped that statistics class.

GeezerGeek's picture

It's called fuzzy math. Taught in Creative Accounting 101.

gcjohns1971's picture

They have to hike rates in June... they can claim QE worked in time to roll it out again in October.

I Write Code's picture

Green bird, all systems are go, fly captain fly upon your mystery ship.

Market Rage's picture

Maybe the bond market will take care of it for everyone....

Glass Seagull's picture



fucking farcical

GeezerGeek's picture

Gold was looking a bit too strong, so they needed to say something to get the algos to drive the price back down.

Fun Facts's picture

USA career path:

zionist media moguel > Federal Reserve Corporation chair

Former Warner Brothers Chief Barry Meyer Joins Board of Federal Reserve in San Francisco

ebworthen's picture

Aggregate seasonally adjusted piles of manure are still bullshit.

Go on, raise rates, reality has been beckoning for 6 years at least.

SheepDog-One's picture

'Imminent rate hike'.....trollolololl

FreeShitter's picture

The Steins are winning.

jg's picture

Hmmm, data mining and goal seeking at its best.

Reminds of 'Get Smart':  'Would you believe....No?  Okay, would you believe...No?  Okay...'


TN Jed's picture

Delta House is on double secret adjusted probation?  Toga!

A is A's picture

LMAO. Look what I just found on Duke University's "Summary of Rules for Identifying ARIMA Models":

"never use more than one order of seasonal differencing"

More taxpayer money hard at work...

fremannx's picture

And so it begins. The Fed will eventually discredited and dismantled, but not before untold suffering occurs. The Creature from Jekyll Island is cutting it's own throat...


foodstampbarry's picture

It's grand theft auto and everything else the elites can steal until that day comes. 

WTFUD's picture

Jump down , turnaround , pick a bale of cotton.

Happy dayz are here again.

The Tylers and the Tin-Foil heads on Z/H must eat all their words now, EVERYTHING IS FIXED.

Do i need the sarc?