The Atlanta Fed’s GDPNow model raised its estimate for third-quarter real GDP growth to an annualized 5.1%, up sharply from 4.4% on September 10.
In their words:
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2026 is 5.1 percent on September 16, up from 4.4 percent on September 10. After recent releases from the US Census Bureau, the US Bureau of Labor Statistics, and the Treasury’s Bureau of the Fiscal Service, the nowcasts of third-quarter real personal consumption expenditures growth and third-quarter real government expenditures growth increased from 3.6 percent and 1.3 percent, respectively, to 4.1 percent and 2.3 percent..
The timing is important. The update shows the US economy growing at a strong pace heading into today’s FOMC rate decision, when the Federal Reserve is widely expected to raise its target rate by 25 basis points. Markets are pricing a roughly 90% probability of that outcome.
Quick analysis: Strong growth by itself is generally good news. However, for the Federal Reserve, an economy growing at an estimated 5.1% annualized pace—supported by accelerating consumer spending—may also create additional inflation pressure.
That gives the Fed little reason to provide policy support. Instead, the strength in growth adds to the argument for today’s expected rate hike and could keep policymakers cautious about signaling when the tightening cycle might end.
The rate decision may be largely priced in. The bigger market-moving questions will involve the Fed’s updated economic projections, the dot plot and Chair Kevin Warsh’s guidance on whether additional rate hikes may be needed.
For markets, a more hawkish outlook would normally support US Treasury yields and the US dollar while creating a potential headwind for stocks. A less-hawkish message—particularly one suggesting the Fed may pause after today—could produce the opposite reaction.
Traders should still remember that GDPNow is a model estimate, not the official GDP report. The estimate can change as new information is released, with the next update scheduled for Thursday.
This article was written by Greg Michalowski at investinglive.com.