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Fed’s Messaging Suggests December Hike, but Data Isn’t Strong Enough

Take what the Fed says with a grain of salt.
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Take what the Fed says with a grain of salt. The hawkish messaging in its October statement suggests a December rate hike is in play, but the economic data isn’t showing the signs of strength needed to justify a liftoff that soon, according to one market pro. ‘I think the [October] statement was more about messaging than anything else,’ said Michael Hewson, chief market analyst at CMC Markets, based in London. ‘I think they wanted to keep the option open for a December rate rise even though the data currently suggests that they’re probably not going to do anything.’ On Thursday, the economy grew just 1.5 percent during the third quarter, according to a report from the Bureau of Economic Analysis. That’s slightly below estimates and well below the 3.9 percent print during second quarter. Consumer spending rose 3.6 percent during the quarter, compared to 3.2 percent in second quarter. Not to mention the continued weakness in inflation, with the core personal consumption expenditure price index (PCE) posting a 1.3 percent rise year-over-year as of August, far from the Fed’s 2 percent target. The September PCE is released on Friday. Hewson said if the Fed was going to raise interest rates in December, they would need to look past soft inflation. TheStreet’s Scott Gamm reports from New York.