NEW YORK (TheStreet) -- Federal Reserve policymakers confirmed what the awful report on first-quarter economic growth had already signaled Wednesday morning: Interest rates won't go up any sooner than September, and probably later than that.

It's not hard to see why: You raise rates when you can, because a surging economy is producing full employment -- or when you have to, because inflation is rising. The Wednesday morning report said the first-quarter economy grew at a 0.2% annual rate, so far below mid-2014's 4% clip as to make a mockery of it, with plunging investment in oil drilling leading the way down.

The same report said core inflation has been only 1.3% for the last year, still well below a 2% yearly target that people forget the economy hasn't materially exceeded in at least 20 years.

That's why the Fed summed up the outlook this way at 2 p.m.:

Economic growth slowed during the winter months, in part reflecting transitory factors. The pace of job gains moderated, and the unemployment rate remained steady. A range of labor market indicators suggests that underutilization of labor resources was little changed. Growth in household spending declined; households' real incomes rose strongly, partly reflecting earlier declines in energy prices, and consumer sentiment remains high. Business fixed investment softened, the recovery in the housing sector remained slow, and exports declined.

Nearly every sentence is more bearish than the corresponding sentence the Fed released after last month's meeting. In March, unemployment was dropping and job growth was picking up -- neither is the case in the most-recent data. Consumer spending was "rising moderately" in March. Investment was "advancing,'' except for maybe in housing.

But you didn't need the Fed to tell you what Bank of America Merrill Lynch (BAC) - Get Bank of America Corp Report economists Michelle Meyer and Ethan Harris wrote in a report released at 12:37 p.m. Eastern time, after the GDP announcement.

"While we are holding to our baseline forecast for the Fed to hike rates in September, the risks are increasing for a later hike," Meyer and Harris wrote. "There were two big shocks to hit the economy at the beginning of the year -- the effect from the plunge in oil prices and rapid appreciation of the dollar -- which are clearly serving as a bigger drag to growth and showing up earlier than we had expected."

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The economy right now is a lot of reasonably dry tinder lacking a match to set it off. That's why the uptick in rates on the 10-year Treasury, which is up to 2.04% from 1.85% in the last two weeks, looks a little premature.

The potential for growth may be one of the reasons that investors aren't totally discounting a rate hike in June -- which the Fed didn't rule out and which helped pull down stocks in late Wednesday trading.

Overall, for the first time in years, you can make the Fed's observation about strongly rising real incomes with a straight face -- and that should be huge.

The big drop in gas prices matters at the margin -- it was a key reason why Sirius XM Radio (SIRI) - Get Sirius XM Holdings, Inc. Report, which lives on the last bits of discretionary personal income, reported better-than-expected subscriber growth for the first quarter. And even with the soft March jobs report, the labor market is in ever-better shape, with more jobs available, more people feeling confident enough to quit jobs, and an average gain of 247,500 jobs a month for the last six.

Cheap gasoline was supposed to be the match that lit consumers' fire, but it scared off investment from the likes of Exxon Mobil (XOM) - Get Exxon Mobil Corporation Report and Baker Hughes (BHI) first. Still, consumer spending rose at a 1.9% clip in the quarter, remaining the strongest leg of the economy's stool. The question is whether the big drop in consumer confidence reported this week will knock even that out from under the case for growth, and for higher rates.

"Perceptions of the job situation weakened not just for current conditions but for future conditions as well," independent economist Joel Naroff says. "People are also less confident their incomes growing. That does not bode well for future spending."

On the other hand, much of the current gloom comes from one bad jobs report last month -- and it may not take much more than one good one next Friday to reverse sentiment, Naroff says. If -- big if -- that happens, then the rising incomes and cheap gas and the other good signs in the economy may come to the forefront.

Consumer wealth is rising, and the S&P/Case-Shiller Index says home prices in five U.S. cities are at or near pre-recession peaks. Plenty is going right, and even the things that are making the Fed wait before boosting rates -- a strong dollar and cheap energy -- are good in the long run.

But not yet. The first-quarter GDP report missed forecasts by a wide margin, and the details had economists speculating about revisions that might make it even worse. Harris and Meyer say full-year growth might not top last year's 2.4%. The mid-year acceleration Merrill and others had counted on has to be seen as in play.

And that means that the days -- only a month or two ago, actually -- when people thought the April meeting could bring the first rate hike seem very far away indeed.