CNBC Survey: Wall Street Doesn't Expect Fed Rate Hike Until July 2015

Wednesday, 20 Aug 2014 02:18 PM

By Dan Weil

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Some financial commentators have grown excited by signs of economic strength in recent weeks, saying the Federal Reserve may raise interest rates as soon as late this year.

Think again, say experts on Wall Street. A CNBC survey of 36 prominent economists, fund managers and analysts on average forecast that the first rate hike will come in July 2015.

The Fed has kept its federal funds rate target at a record low of zero to 0.25 percent since December 2008.

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

Survey respondents predict the rate-hike cycle will close in the fourth quarter of 2017 with the fed funds rate at 3.16 percent. That would be the lowest terminal rate in history, easily besting the 5.25 percent close of the 2004-2006 rate increases, according to CNBC.

The estimate of 30 months for the rate-hike cycle compares to a 21-month average since 1983.

"The Fed is going to move very slowly," Scott Wren, senior equity strategist at Wells Fargo Advisors, wrote in his survey response. "This modest growth/modest inflation environment is unlikely to change."

Meanwhile, 30 economists in a recent Wall Street Journal survey voiced concern that the Fed will wait too long to hike rates, with only three worried the Fed will act too soon.

It's not just economists who fear the Fed is too dovish. "They are making me nervous," Arun Raha, chief global economist for industrial manufacturer Eaton Corp., told The Journal.

"Given the strength of the job market, manufacturing and non-residential construction, it's about time they got rid of their low-rates-for-an-extended-period viewpoint."

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

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