Atlanta Fed Increases Q3 Real GDP Forecast To 3.0% As Catastrophe Bonds Plunge (Fed Not Likely To Raise Rates Again Until September 2017 Meeting)

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The Atlanta Fed’s GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2017 is 3.0 percent on September 8, up from 2.9 percent on September 6. The forecast of the contribution of inventory investment to third-quarter real GDP growth increased from 0.87 percentage points to 0.94 percentage points after this morning’s wholesale trade report from the U.S. Census Bureau.

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Of course, these GDP numbers do not yet include the horrific damages caused by Harvey or Irma (while Jose is pushing out into the Atlantic Ocean). The damage to housing, commercial real estate and automobiles from Harvey and Irma will be quite extensive.

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Catastrophe (Cat) bonds took a big plunge on Irma.

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The extensive hurricane damage is likely to reduce the chance of a Fed rate hike. As of today, the implied probability of a Fed rate hike does not exceed 50% until the September 26, 2018 meeting. And then it is only 55.3%.

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The most likely path of Fed rate hikes is beginning to look like the train from the movie “Snowpiercer.”

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Be safe Texans and Floridians.

  

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