The minutes of the FOMC meeting of May 2-3 will be released on Wednesday at 14:00 ET. In the immediate wake of the FOMC statement there was optimism that Fed policymakers were leaning toward a pause in interest rates after a cumulative – and relatively swift – raising of the fed funds target range by 500 basis points that began in March 2022. However, Fed Chair Jerome Powell pushed back against that perception in his press briefing on May 3 though he did say last week that tight credit conditions may limit the need for further policy tightening. In the weeks since the meeting, other Fed policymakers have cautioned against being too certain that more rate hikes are not on the way. The minutes are likely to reinforce these views, and that these views probably haven’t shifted. The economic data released in recent weeks point to a still strong labor market and continued stubborn inflation. This is the formula that has kept the Fed on a path of further tightening to address imbalances in the labor supply/demand and reduce demand for goods and services that are pushing up prices.

The second estimate of first quarter GDP is set for 8:30 ET on Thursday. The Census Bureau has been releasing annual revisions to business sales and inventories, and for housing starts and permits issued. There generally isn’t a big revision from the advance to the second estimate, but the up 1.1 percent will feel these impacts. Nonetheless, much of it is likely to be mostly small and offsetting.

The April and early May reports so far point to another quarter of modest expansion. Concerns about the US economy slipping into recession are not absent, but if consumer spending remains on track, it is possible that one can be avoided. The Atlanta Fed’s GDPNow forecast for the second quarter is for growth of 2.9 percent, while the St. Louis Fed’s Real GDP Nowcast is for negative 0.89 percent. There aren’t enough data to make a firm forecast as yet. An average of the two is for up 1.0 percent, in line with what is known about the first quarter.

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