A pedestrian walks past the Federal Reserve building on Constitution Avenue in Washington on March 19, 2019.

Disappointing retail sales in April fueled the latest leg down in the Atlanta Fed outlook. The Commerce Department reported Wednesday that sales declined 0.2% for the month against expectations of a 0.2% gain. Along with the retail letdown, industrial production fell 0.5% against Wall Street estimates of a 0.1% gain.

The Atlanta Fed's closely watched GDPNow tracker is pointing to a 1.1% gain for the economy in the second quarter, according to a revision posted Wednesday. That comes on the back of a strong first three months that saw a 3.2% gain and is substantially lower than CNBC's Rapid Update survey, which puts the GDP tracking estimate at 2%.

A Federal Reserve projection on economic growth just weakened substantially, and expectations for a rate cut over the next eight months got a lot stronger.

Taken together, the weaker-than-expected numbers took a half percentage point off the Fed's previous second-quarter estimate.

The drop in the GDP forecast coincided with market expectations that the Fed will be lowering interest rates in the months ahead.

Futures trading now indicates an 80% chance of a rate cut by January 2020, according to the CME's FedWatch tool. However, the decrease could come even sooner than that — the tool assigns a 51% probability of a move lower in September and a nearly 42% chance of two cuts by January.

Fed officials have been unified in saying they don't foresee a cut or an increase before the end of the year.

In a speech Wednesday, Richmond Fed President Thomas Barkin said, "It makes sense to remain patient" when it comes to policy moves.

"There's not a strong case to push rates higher when inflation is under control; there's not a strong case to move lower when growth remains healthy," he said.

The Fed's benchmark short-term interest rate is currently targeted in a range between 2.25% to 2.5%.