What The Market Wants To Hear From The Fed Next Week?

After the weakness seen in the first-quarter, the economic data for the second-quarter has come in as a respite for the markets. Michael Gapen, Barclays PLC (ADR)BCS chief U.S. economist, was on CNBC Friday to discuss the current state of the U.S. economy and what Fed needs to communicate at its last press conference next week before it meets again in September.

The Economy Has Strong Monetum

“The second-quarter looks in very good shape,” Gapen began. “We have had a string of about two weeks of very solid data that suggests that the softness in Q1 will be a transitory event that the growth is rebounding.”

He continued, “There is still somewhat of an open question about the strength of the consumption spending, but the data really this week lined up in a positive fashion. We have very solid auto sales last week, retail sales surprised quite strongly. The consumer looks in very good shape and we think the economy has strong momentum.”

Is Fed Happy About The Strength?

Gapen was asked what does the market needs to hear on Fed’s last press conference before September that is scheduled next week. He replied, “So, I think, the main message the Fed needs to deliver is whether or not it’s happy about the strength of the economy and the momentum. So, they have been expressing a lot of fear about are things softening, does the economy have momentum. We are thinking about raising rates.”

“I think, that’s really the primary goal is to communicate things have gotten better. We feel better about where the economy is. Beyond that they need to say a lot more. But I think, that’s the most important thing that they have to communicate right now,” Gapen concluded.