At its last policy meeting in March, the Fed acknowledged global
risks to the U.S economy in justifying a pause and suggested about
two more rate hikes are in store this year, only half of what they
originally thought in December.
The latest Reuters poll taken this week of more than 80 economists,
including almost all of the Wall Street primary dealers, remains
roughly in line with that thinking.
Fifty of 80, about two-thirds of the sample, expect the Fed to raise
its target federal funds range next in June, to 0.50-0.75 percent.
Another 20 percent said September, with the remainder saying either
July or December.
One economist said the Fed's next move will be a 25 basis point cut
back to 0.00-0.25 percent at year-end and two said rates will remain
on hold for the remainder of the year.
No one expected a rate rise at the conclusion of the Federal Open
Market Committee's April 26-27 meeting.
Of those who expect rates to rise a second time this year, nearly
three-quarters thought the follow-up would be in the fourth quarter,
bringing the funds rate to 0.75-1.00 percent.
For a graphic: http://tmsnrt.rs/1XMnDs6
But interest rate futures and bond market traders show less
conviction on a series of hikes this year, underscoring an ongoing
wide gap between markets and policymakers on the trajectory of
Boston Fed President Eric Rosengren warned again earlier this week
that the central bank is likely to raise rates more quickly than
futures markets are pricing in.
In the meantime, concerns about the global economy and uneven growth
in the U.S. have lingered. [ECILT/US]
Economic growth in the first quarter probably slowed sharply, which
has become a pattern in recent years. The latest Reuters poll shows
a marked slowdown with forecasts in a wide range.
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The Federal Reserve Bank of Atlanta, which does a real-time
forecast, said the economy likely stalled in January-March, with
just 0.1 percent annualized growth.
"Only if GDP growth fails to pick up in Q2 will the FOMC deliver
fewer than two hikes this year," said Philip Marey, a senior U.S.
strategist at Rabobank.
"Part of the slowdown in Q1 GDP growth can be attributed to a
residual seasonality problem that has not been solved completely."
The U.S. labor market has been the bright spot, and suggests that a
long-awaited pick-up in wage inflation may materialize later this
year, which might give the Fed more reason to continue raising
The number of Americans filing for unemployment benefits
unexpectedly fell last week, hitting its lowest level since 1973,
suggesting the slowdown in growth in the first quarter might not
(Additional reporting and polling by Kailash Bathija, Sarmista Sen
and Anu Bararia; Editing by Ross Finley/Jeremy Gaunt)
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