WSJ Survey: Most Economists Say Fed Will Stay on Hold in September
12 September 2015 - 12:40AM
Dow Jones News
It's a close call, but most private economists polled think the
Federal Reserve will keep short-term interest rates pinned near
zero next week.
About 46% of business and academic economists surveyed over the
past week by The Wall Street Journal predicted the Fed's first rate
increase would come at the Sept. 16-17 policy meeting. While a
plurality picked September, a majority predicted liftoff would
arrive at some later meeting. About 9.5% said the Fed would lift
off in October, while 35% said the first rate increase would come
in December and 9.5% said the central bank would wait until
2016.
Expectations for an imminent Fed rate increase have fallen
sharply in the past few weeks. In early August, 82% of economists
thought the Fed would raise rates in September. Just 3% saw the
first move coming in October, 13% predicted a December liftoff, and
2% saw officials waiting until next year.
"What's keeping the Fed from lifting rates is not the U.S.
economy, which is actually doing quite well," said Bernard Baumohl,
chief global economist at Economic Outlook Group LLC. He predicted
a September liftoff in last month's survey but now thinks the Fed
will wait until December. "It's the worry that a sharp slowdown in
China will devastate emerging countries enough to drag down global
economic growth, and that may ultimately impact the U.S. too."
There remains a decent chance the Fed could still act next week,
economists said. On average, forecasters estimated the probability
of a September rate increase at 42%. By comparison, futures
markets—where traders make bets on the Fed policy outlook— signal
only a 24% chance of the Fed raising rates this month, CME Group
said Thursday.
Joshua Shapiro, chief U.S. economist at MFR Inc., said he thinks
the Fed will start raising rates in October, but still gave a 45%
chance of a move in September. "It's a close call, but I do think
they haven't really definitively set markets up for this," he said.
"By a narrow margin, we're likely to see no change—but a policy
statement that's very focused on a near-term rate rise, if
everything goes according to plan."
A third of economists said the likelihood of a Fed rate increase
next week was above 50%. Even among forecasters who said September
was the most likely month for liftoff, the probability of a move
averaged just 53%.
"For a lot of people like me, September has been the least
unlikely time to start for quite a while," said Lou Crandall, chief
economist at Wrightson ICAP. But he only attached a 45% probability
to liftoff next week. "It would be difficult to have confidence in
either direction," he said.
The Journal polled 64 private forecasters Friday through
Wednesday, though not every economist answered every question.
At the beginning of 2015, most economists thought the Fed would
raise rates by midyear. After an economic slowdown in the first
quarter, predictions for the first rate increase coalesced around
September. But turbulence in financial markets and worries about
China's economic slowdown raised doubts in recent weeks about
whether the Fed is ready to begin raising its benchmark
federal-funds rate, which has been pinned near zero since December
2008.
"All of the data that we have had up until now has been, I
think, encouraging. It…has been about as good, or better, than I
was expecting, in terms of the U.S. economy," Federal Reserve Bank
of San Francisco President John Williams said in an interview with
the Journal. "But there are some pretty significant—and I would say
have now grown larger—headwinds that have developed."
There was little sign that Fed officials were near agreement on
raising rates ahead of the policy meeting that will begin Wednesday
and conclude on Thursday.
Federal Reserve Bank of New York President William Dudley in
August said a September rate increase "seems less compelling to me
than it did several weeks ago."
But other policy makers, like Federal Reserve Bank of Richmond
President Jeffrey Lacker, have appeared eager to start. "I'm not
arguing that this economy is perfect by any means, but nor is it on
the ropes, requiring the stimulus of low monetary policy interest
rates to get it back into the ring," Mr. Lacker said last week.
Write to Ben Leubsdorf at ben.leubsdorf@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 11, 2015 10:25 ET (14:25 GMT)
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