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On Thursday, a revision of economic data for the first quarter showed the economy grew faster than originally expected, even though inflation was higher than originally expected.
The labor market shows corrections due in part to fraud data in Massachusetts. Jobless claims have not risen as much as previously expected.
Taken together, these data points reinforce the view that current economic data do not match the pessimism of some economists warning of a recession.
“The argument that we’re definitely going into a recession is questionable,” Rick Reader, chief fixed income officer at BlackRock, told Yahoo Finance Live. “The question is whether inflation will be low enough to hit the target, which is not clear at this point,” he said.
Rieder’s comments come in the middle of a week that showed that consumer spending power is not deteriorating at a breakneck pace. Best Buy (BBY) predicts increased demand for consumer technology in the second half of the year, believing the worst quarter is behind us. Specialty clothing retailers Urban Outfitters (URBN) and Abercrombie & Fitch (ANF) reported strong sales. And even business-to-business spending doesn’t look off the cliff, as stocks of Nvidia (NVDA) and Palo Alto Networks (PANW) have risen on upside expectations.
Gross domestic product (GDP) growth is expected to grow 2.9% in the second quarter, according to the Atlanta Fed, which said spending conditions will continue to build and further quarterly growth is expected.
In a note Thursday, Citi’s team of economists said, “The combination of strong growth in the first quarter and strong inflation has led the Fed to add more if necessary to cool activity enough to bring inflation back to 2%. “It made us more likely to consider raising rates.”
Federal Reserve Chairman Jerome Powell left the option open at his final press conference on May 3, suggesting what economists later called a “hawkish pause.”
The Fed chair said the next decision will be made on a meeting-by-meeting basis based on the “total amount of data coming in.”
But that stance appears to be changing, at least among other Fed officials. On Wednesday, Fed President Christopher Waller discussed the possibility of the Fed “increasing” or “skipping” rate hikes at this meeting, suggesting more rate hikes are possible in the future.
“Unless we have clear evidence that inflation is falling towards our target, I will not support a halt to rate hikes.” [from] Our target is 2%,” Waller said.
Boston Fed President Susan Collins had a different tone on Thursday.
“Inflation is still too high, but there are some encouraging signs of easing,” Collins said in a speech at Rhode Island Community College. “I think monetary policy is at or near the point where it can pause rate hikes.”
Ahead of next week’s employment report, the current “comprehensiveness of the data” has led the market to bet on another interest rate hike in June. As of Thursday afternoon, the market was pricing in a near 50% chance of a rate hike or pause in June, according to the CME Fed monitoring tool.
On the day of the CPI report on May 10, when it was revealed that inflation was cooling at its fastest pace in two years, the market was almost 100% certain that policy would be paused.
But with unemployment at its lowest level since 1969 and a resilient labor market, with consumers spending through inflationary pressures, economists once thought it would be an easy road. have doubts about
The Oxford Economic Economists team said: “While we expect the Fed to keep rates on hold at its June meeting, this month’s FOMC meeting notes that labor market conditions will need to ease further significantly to avoid a permanent rate hike. Something has become clear,” he said. I wrote on Thursday.
Josh is a reporter for Yahoo Finance.
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