As the Fed Cuts GDP Predictions, Rate Cuts Become More Likely

May 16, 2019

The Atlanta Fed’s GDPNow tracker is predicting slower growth in the second quarter. The closely watched forecast was revised down last week, and is now anticipating just 1.1 percent growth this quarter. If accurate, this would be a substantial drop from Q1’s 3.2 percent growth. The reduced prediction comes in the wake of April’s disappointing retail sales.

While the Fed has said that interest rate cuts are unlikely, economists predict that slowing GDP growth may change their minds. Futures traders as the CME Group have a FedWatch tool that calculates the probability of the Fed’s decisions. They now see an 80 percent likelihood of a rate cut by January 2020. It may come even sooner. The tool predicts a 51 percent chance for a cut in September and a 42 percent change of two cuts by next January.

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