What? Did the regional Federal Reserve banks all miss their money coffee? Their GDP forecasts released today all sure were grumpy. The most visible of the bunch, the Atlanta Fed’s GDPNow forecast calls for 2.9% growth in the second quarter. The forecast was looking for 3.2% growth on Wednesday.
No surprises on interest rates. A mild surprise on reducing the Federal Reserve’s balance sheet. As expected–the Fed Funds Futures market was giving odds of 99.6% that there would be a 25 basis point interest rate increase–the Federal Reserve raised interest rates for the second time in 2017 and for the third time in six months. The 25 basis point increase took the federal funds rate to 1.00% to 1.25%.
Unless you’ve been hiding under a rock, you know that the Federal Reserve is set to announce a decision on interest rates after tomorrow’s meeting of its Open Market Committee. And you also know that the Fed is widely expected to raise its benchmark interest rate by 25 basis points to a range of 1.00% to 1.25%. How widely exactly? Well, the Fed Funds Futures market has priced in a 99.6% chance of an interest rate increase on June 14.
On Wall Street they’re calling it Super Thursday and it has frozen financial markets in their tracks.
Nothing in the weekly report on initial claims for unemployment to set the heart a twitter. But the numbers look good enough to keep the Federal Reserve on track for a 25 basis point interest rate increase at its June 14 meeting. Initial claims for the week ended May 27 increased by 13,000 to 248,000. This report kept initial claims below 300,000 for a 117th consecutive week
Banking stocks continued their recent drift. The Financial Select Sector SPDR (XLF) closed the day at $23.25. That’s below the sector’s May 25 close at $23.62. The sector, one of the best performing sectors in the market since the election, has been a key to moving the Standard & Poor’s 500 upward earlier in 2017. The KBW Banks Index had been up 32.2% from the election to the beginning of March, but is now ahead just 20%
Consumer spending picked up in April, signaling that growth in the economy as a whole is headed for a rebound after a weak first quarter. Purchases increased by 0.4% in April, matching projections from economists surveyed by Bloomberg, after a 0.3% gain in March. On the other hand, the Fed’s preferred inflation measure, the PCE, rose just 0.2% in April from March and is now up only 1.7% year over year. That’s below the 2% inflation target set by the U.S. central bank
The second estimate for U.S. GDP growth in the first quarter came in today at a much stronger than expected 1.2% annualized rate. That was an upward revision from a first estimate of 0.7% annualized growth. Economists were expecting a smaller increase to 0.9% annualized growth. The stronger than expected revision locks in an interest rate increase by the Federal Reserve at its June 14 meeting, in my opinion.
