Reuters Poll Points to 2 Fed Rate Hikes in 2016

Growing concerns about weak global growth and inflation are unlikely to deter the U.S. Federal Reserve from tightening policy, according to a Reuters poll that suggested two interest rate hikes are likely this year.

The Fed’s December decision to raise rates for the first time in nearly a decade has been under scrutiny recently, with some market players suggesting it was a mistake and that Chair Janet Yellen may have to backtrack.

But most economists disagree.

The poll of over 80 analysts predicted another hike would come in the second quarter and penciled in one more towards the end of the year, which would leave rates between 0.75 and 1.00 percent.

That would be one less rate hike than they forecast in a survey taken last month but still more than financial markets expect, further underscoring the growing divide between the two groups.

“Unless the economy rolls over, there is still a very high likelihood of at least one rate hike this year,” said Sam Bullard, senior economist at Wells Fargo.

Analysts who answered an additional question assigned a 75 percent chance of at least one hike this year, in contrast with markets pricing in just a 1-in-3 chance.

Markets predict no move until mid-2017, by which time economists expect the Fed to have raised rates four times to 1.25-1.50 percent.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza