CNBC Survey Points to Fed Next Rate Hike in May

Global economic weakness and recent market volatility will prompt the Federal Reserve to delay, but not cancel, rate hikes this year, according to the most recent CNBC Fed Survey.

An overwhelming 88 percent of survey respondents say the Fed’s next move will be to hike interest rates, but they’ve put off that hike until May, a month later than the survey conducted in December. Just 13 percent believe the Fed’s next move will be to either cut rates or launch another quantitative easing program.

“Financial turmoil and the stock market swoon are overdone, especially with additional policy stimulus to come from outside the U.S.,” said one of the respondents, Allen Sinai, chief global economist of Decision Economics.

Many of the 40 respondents, who include economists, fund managers and analysts, agreed the Fed should not be reacting to the recent market volatility. Just 15 percent say the recent rate hike was a mistake; 80 percent said it was “the right move.” While 100 percent of respondents say the Fed won’t hike at its January two-day meeting, which begins Tuesday, some say hiking will be the right move again as soon as March. The survey was conducted Thursday and Friday.

“We see nothing fundamental in market dips and expect the Fed to look through this in March,” said John Ryding, chief economist of RDQ.

Still, 56 percent say the recent market volatility will delay future rate hikes. And while the Federal Open Market Committee has suggested four rate hikes this year, respondents to the CNBC Fed Survey see an average of roughly just two. In fact, 66 percent in the survey predict zero to two hikes. Respondents see the funds rate ending the year at just 0.88 percent, compared with the Fed’s 1.4 percent projection.

via CNBC

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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