Dear Janet, you have a problem! With jobs surging, stocks at record highs, volatility near record lows, China stable, and Brexit behind us, today's shocking upgrade of the US economy by The Atlanta Fed (to +3.8% growth) leaves The Fed with little to no excuse for hiking rates at least once if not twice this year...
This is the highest forecast for US GDP growth since January 2015... how did that guess work out? (Hint it collapsed to ZERO by quarter-end)
This is dramatically higher than the +2.2% consensus estimates, (and well above the NY Fed's +2.6% estimate) as The Atlanta Fed explains:
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2016 is 3.8 percent on August 5, up from 3.7 percent on August 4.
After this morning's employment situation release from the U.S. Bureau of Labor Statistics and this morning's international trade report from the U.S. Census Bureau, the forecast for third-quarter real gross private domestic investment growth increased from 8.1 percent to 8.8 percent.
In addition Goldman increases their odds of a rate hike this year...
With payrolls, unemployment claims, consumer sentiment, vehicle sales, and a number of business surveys in hand, our preliminary read for the July Current Activity Indicator is +2.3%, up from +2.1% in June. The three-month moving average edged up to 1.8% from 1.7% in June.
In light of the stronger-than-expected jobs report, we revised up our subjective odds of a rate increase at the September FOMC meeting to 30% from 20% previously. We kept the probability of an increase in December at 45%--implying a roughly 75% chance of at least one rate increase this year.
So if hiking rates sends stocks higher and cutting rates is supposed to send stocks higher, what is the point of The Fed?