Economic growth appears to be running nearly twice as fast as the Fed expected at the end of last year, raising doubts about whether the central bank will cut interest rates before the end of the year.
The Atlanta Fed’s GDP Now Tracker, which estimates gross domestic product based on future economic data, showed first-quarter growth at 2.8% on Monday, up from 2.3% last week.
This is the first growth indicator since the end of the January-March quarter.
GDPNow is not a GDP forecast. Instead, it is based on a model that estimates growth based on recently released economic data.
In December, Fed officials’ median forecast was for the economy to grow 1.4% this year. At the March meeting, the median forecast rose to 2.1%. The consensus among economists, which often lags incoming data, is that growth in the most recently completed quarter was 2%.
On April 1st, #GDPNow The model nowcast for real GDP growth in Q1 2024 is 2.8%. https://t.co/T7FoDdgYos #ATLFedResearch
For the latest GDPNow nowcasts, download the EconomyNow app or visit our website. https://t.co/NOSwMl7Jms pic.twitter.com/0RCczAthaf
— Atlanta Fed (@AtlantaFed) April 1, 2024
The Federal Reserve sees the economy’s long-term potential growth rate at around 1.8%. Higher growth rates are seen as increasing the risk of inflation.
Strong economic growth and a vibrant labor market may persuade the Federal Reserve to hold off on cutting rates. Federal Reserve Chairman Jerome Powell said Friday that he still expects the central bank to cut rates this year, but that strong economic data will allow the central bank to be patient in starting to cut rates.
The market’s odds of a June interest rate cut were about 57% as of Monday, down from about 70% a week ago.
