GDP Report Clips Doves

While regional manufacturing surveys may reveal that the Fed's tightening cycle has had its impact, the real test of the tightening is in the labor market, which has shown no signs of weakening thus far. Without rising unemployment, the Fed is unlikely to consider rate cuts. Indeed, Fed officials of late have repeatedly mentioned the heightened threat of wage inflation, with unemployment at 4.50% and showing no signs of slipping. As San Francisco Fed President Janet Yellen says, the labor market is "gangbusters."

Stay tuned.