Tags: economists | Fed | rates | traders

Economists See Fed Moving Sooner, Further on Rates Than Traders Do

By    |   Tuesday, 11 November 2014 01:25 PM

Top economists expect the Federal Reserve to begin raising interest rates sooner and by more than federal funds futures traders expect.

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

A Blue Chip Economic Indicators survey of economists shows they anticipate the Fed will start lifting rates in June 2015, MarketWatch reports. Meanwhile, fed funds traders are forecasting a September beginning.

Economists predict a fed funds rate of 0.92 percent at the end of 2015, compared with only 0.57 percent for fed funds traders. And economists estimate a fed funds rate of 2.17 percent for year-end 2016, compared with traders' projection of 1.51 percent.

"The bond market for some time has diverged with the economist consensus. That could reflect bets on more extreme positions, that by definition wouldn’t be included in median projection of economists," MarketWatch states.

Interestingly enough, economist Nouriel Roubini of New York University agrees with fellow economists that the Fed will first act around the middle of the next year. But he sees that as a slow move.

While the U.S. economy will grow 3 percent over the next year or so, compared with 3.5 percent just reported for the third quarter, the rest of the world will slow down, pushing the dollar up and creating headwinds for the U.S. economy, Roubini tells CNBC.

"That implies the Fed will start raising slightly later and slower than otherwise expected. It could be sometime in the middle of next year. It could be June, it could be July," Roubini notes. "It depends what happens to the dollar and the rest of the world."

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Top economists expect the Federal Reserve to begin raising interest rates sooner and by more than federal funds futures traders expect.
economists, Fed, rates, traders
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2014-25-11
Tuesday, 11 November 2014 01:25 PM
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