CNBC Survey Says Fed To Hike Rate by Summer 2015

Wall Street is looking for lower inflation and stronger growth from the plunge in oil prices but the CNBC Fed Survey shows it still sees the Federal Reserve on track raise interest rates this summer for the first time in eight years.

Instead of seeing the Fed putting off rate hikes because of lower inflation, respondents forecast a gentler rate hike cycle. The average liftoff month remains July 2015 but the estimate for the fed funds rate declined in 2015 to 0.83 basis points, down 6 bps, and 2016 to 1.93, down 11 bps.

The 38 respondents, who include economists, strategists and fund managers, also lowered by 10 bps their estimate of where the Fed would stop hiking interest rates. The so-called terminal rate is now forecast to be 3.2 percent, and the market now sees the Fed hitting that rate in the first quarter of 2018, a quarter later than the previous survey.

“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,” wrote Pimco’s Tony Crescenzi, suggesting the central bank would tolerate the economy running “slightly hot.”

The results suggest that the market senses a commitment by the Fed to begin raising interest rates next year. But changes to the outlook, such as weaker or strong growth, are seen altering the speed of those rate hikes.

via CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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, Alfonso Esparza 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 has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. 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