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.