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Fed watchers looking past September for rate hike

by Vicki Needham - 07/28/15 12:13 PM ET

Fewer Wall Street watchers think the Federal Reserve will raise its key interest rate this fall.

While a majority are still forecasting that the Fed will hike the rate in September — in what would be the first increase in nine years — expectations are shifting more toward October and December, CNBC’s Fed Survey for July showed on Tuesday.

“The market seems to be saying ‘no’ even as the Fed is saying ‘yes’ to a near-term rate hike,” Kevin Giddis of Raymond James/Morgan Keegan wrote in response to the survey.

A little more than half of the survey’s 35 respondents of economists, fund managers and analysts, say the rate hike will come in September, down from 63 percent in the prior survey.

The survey shows that 82 percent say the Fed will make a move this year, but that’s down from 92 percent in the prior survey.

Federal Reserve Chairman Janet Yellen recently told Congress that the rate will likely increase later this year if the the economy continues to strengthen.

The forecast for the year-end Fed funds rate continues to decline, too, with the average at 0.47 percent, down from 1 percent a year ago.

Inflation running below the Fed’s target along with questions about the U.S. economy’s growth and global weakness could slow the rate hike, the survey said.

Growth is forecast for about 2.4 percent for this year, up slightly from the previous survey but down from the 3 percent anticipated in December.

Worries about global growth top concerns with 29 percent of respondents listing it as their top concern, up from 22 percent in the previous month’s survey.

“There are two important issues that need to be resolved before the Fed will be comfortable … moving toward restraint. The first is inflation,” said Hugh Johnson of Hugh Johnson Advisors. “The second issue is China.”

Fed governors are set to meet on Wednesday.

The survey was conducted July 23-24.

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