Tags: Fed | funds | rate | 2015

CNBC Survey: Fed Will Begin Raising Rates in July

By    |   Tuesday, 16 December 2014 11:17 AM

Wall Street anticipates the Federal Reserve will start increasing interest rates in July, a forecast unchanged from October, according to a new CNBC survey.

The survey included responses from 38 economists, strategists and money managers, who on average predicted that date for the first rate hike. Fed funds futures traders are evenly split between July and August for the start date.

The Fed has kept its federal funds rate target at a record low of zero to 0.25 percent for six years.

The survey produced an average forecast of 0.83 percent for fed funds at year-end 2015, compared with the 0.5 percent prediction from fed funds futures traders and 1.25 percent from Fed policymakers.

Many economists expect the Fed to move cautiously, especially given oil prices' plunge to five-year lows.

"With inflation low and wage growth weak, the Fed can afford to be patient. A pickup in wage growth in 2015 won't likely change matters, either," Tony Crescenzi, market strategist at Pimco, told CNBC.

In addition, 56 percent of the respondents said the market has already discounted a fed funds rate hike next year, while 36 percent said it hasn't.

The average prediction for the S&P 500 at the end of 2015 is 2,194 and 2,311 for the end of 2016.

Bill Gross, formerly Crescenzi's colleague at Pimco and now a fund manager at Janus Capital Group, told Bloomberg, "I think that yes, it [the Fed] moves towards a dovish stance relative to what the market expected a few days ago," given the oil-price move.

There has been talk that the Fed might strike the words "considerable time" from its policy statement Wednesday in describing the time period for steady interest rates.

"Why would they start to eliminate [that] language . . . when the U.S. itself is not deflating but disinflating and certainly not moving in the direction of its [the Fed's] 2 percent [inflation] target," Gross said.

The personal consumption expenditures price index climbed 1.4 percent in the 12 months through October.

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Wall Street anticipates the Federal Reserve will start increasing interest rates in July, a forecast unchanged from October, according to a CNBC survey.
Fed, funds, rate, 2015
336
2014-17-16
Tuesday, 16 December 2014 11:17 AM
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