Fed Rate Hike May Be Postponed Due to Inclement Data
While the Fed remains anxious to hike rates, weak growth may cause further delays in liftoff. Indeed, Q1 GDP growth came in barely positive, and it is now expected to be revised negative. Furthermore, Q1 only saw positive growth because inventory buildup contributed three-quarters of a percentage point to growth.
But, with inventories likely to act as a drag on Q2 GDP growth, the Fed is facing negative or zero growth for the first half of the year – the result of the growth rate cycle slowdown we called for in December – making a rate hike increasingly unpalatable.