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US: 3Q GDP to impact on Fed’s policy – Wells Fargo

FXStreet (Córdoba) - According to economist from Wells Fargo Bank, the US decline in US GDP growth during the third quarter may hold significant implications for the Federal Reserve.

Key quotes:

“The third quarter’s dip in real GDP growth may hold significant implications for the Fed, which has made no secret that it would like to begin raising the federal funds rate in 2015.”

“The third quarter GDP figures will be released one day
after the October FOMC meeting. The Federal Reserve Bank of Atlanta’s GDP Now forecast currently pegs third quarter growth at 0.9 percent. Such a pace would make it questionable that the Fed would follow through with a December rate hike".

“Lower interest rates for an even longer period would provide the economy with some tangible benefits. For starters, the dollar would be a little less strong than it would otherwise and would help support manufacturing output and corporate profits in general. Lower interest rates would also help the housing market gain further momentum and could bring about a bit more stability to the financial markets.”

“Interest rates are still likely headed higher in 2016. The extent of future hikes and the pace at which they take place, however, will likely be less dramatic than the Fed indicated at its September meeting.”

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