Wall Street expects the Federal Reserve to be so dovish that the coming round of interest rate hikes won’t begin until the middle of next year and won’t end until the next president is in office for nearly a year.
A special CNBC Fed Survey, prepared ahead of the central bank’s annual meeting in Jackson Hole, Wyoming, found that market participants expect the coming rate hike cycle to end in the fourth quarter of 2017 at 3.16 percent. That would be the lowest final or terminal rate ever. It would beat the next lowest—the rate hikes in 2004 through 2006 that ended at 5.25 percent—by more than 2 percentage points.
The 36 survey respondents, who include economists, fund managers and analysts, on average believe it will take 30 months from the first rate hike to the last, nine months longer than the average rate hike cycle since 1983. The first rate hike isn’t expected until July 2015, a month earlier than the prior survey. The 3 percentage point increase is about average compared to other rate hike cycles since 1983.