Janet Yellen in her press conference Wednesday said that the US GDP for next year and 2018 will be lower than previously expected, yet all is well according to the Fed chief.
The Fed governors projections for economic growth (dot plot) was knocked back to below 2% for 2017 and 2018. Remember that the Fed’s projections never come in lower than reality. For the last 8 years the Fed’s projections have always been rosier that the actual growth, so the projections for 2017-2018 may mean that the next two years will be worse than the last two years.
However if you listened to Yellen, she spoke about a growing economy based on job growth. It was very strange how the data disconnected with her comments.
So the narrative coming out of the meeting is that there will be a rate rise in December. But how can you raise rates if growth is nearing stall speed and we could be in a recession in 2017 given the Fed’s rosier than real projections?
But none of that matters as the Nasdaq hit an all-time high while Yellen spoke and bonds sold off as markets figured that a low Fed Funds Rate will be with us for the foreseeable future.