In her speech on the economic outlook today, Fed Chair Janet Yellen argued that the slowdown in first-quarter GDP growth was "largely" due to temporary factors, such as the record cold weather in the Northeast and the West Coast port dispute. "Largely" is a bit stronger than the "in part" used in the most recent FOMC statement, suggesting that Yellen is more convinced that there will be a rebound in growth in the second-quarter and beyond.
She also seems to be buying into the idea that some of this "apparent" first-quarter slowdown "may just be statistical noise". In the past few days the BEA has admitted that it will be revising the GDP figures to eradicate any residual seasonality - since first-quarter GDP growth has averaged only 0.6% annualised over the past few years, while growth in the remaining three quarters has averaged nearer 3%.
"She repeated her assessment made in previous speeches that "it will be appropriate at some point this year to take the initial step to raise the federal funds target." That doesn't really narrow down the lift-off date that much. But assuming that economic growth does rebound, and particularly now that there are signs of a pick-up in underlying price inflation and wage growth, we don't think the Fed can wait any longer than September." said Capital Economics
