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Tags: BofA | Fed | rate | hike

BofA Moves Up Prediction for First Fed Rate Hike to June 2015

By    |   Thursday, 11 September 2014 08:21 PM

Recent signs of economic strength apparently have made believers out of Bank of America economists.

They have shifted their forecast of the Federal Reserve's first interest-rate hike to June 2015 from September 2015, MarketWatch reports.

The BofA analysts cited stronger-than-expected economic growth and inflation. GDP expanded at a 4.2 percent annual rate in the second quarter after contracting at a 2.1 percent rate in the first.

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The Fed has a 2 percent target for inflation, and its favored inflation gauge, the personal consumption expenditures price index, rose 1.6 percent in the 12 months through July.

BofA economists also cited the salutary impact of rising asset markets on the economy and a "re-engagement of the banking system." In addition, rhetoric has turned more hawkish from Fed Chair Janet Yellen and her colleagues, they say.

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

Not everyone agrees with the BofA analysis. Investment star Jeff Gundlach, CEO of DoubleLine Capital, says Yellen isn't signaling an aggressive posture on raising rates. "I don't really hear Janet Yellen saying that. I hear a lot of her associates saying that," he told CNBC.

"She seems to be more concocting excuses why not to raise interest rates. I don't think Janet Yellen wants to raise interest rates anytime soon, and I don't think there much of a reason to raise interest rates."

Meanwhile, Vincent Reinhart, chief economist at Morgan Stanley, says he doesn't expect a rate hike until the beginning of 2016, according to MarketWatch.

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Finance
Recent signs of economic strength apparently have made believers out of Bank of America economists, who now expect the Federal Reserve's first interest-rate hike to come in June 2015, three months earlier than they previously forecast.
BofA, Fed, rate, hike
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2014-21-11
Thursday, 11 September 2014 08:21 PM
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