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 Nine of 17 primary dealers, the banks that deal directly with the
Fed, said the U.S. central bank's first rate increase would occur in
the second quarter of 2015, the survey found.
In a survey taken in early August, six of 19 dealers had expected
such a move.
All but five of the 22 primary dealers participated in the latest
survey.
The view that the Fed has accelerated its timeline for raising rates
came even after Friday’s monthly employment report, which showed
that U.S. employers hired the fewest number of workers in eight
months in August and that more Americans gave up the hunt for jobs.
Nonfarm payrolls increased 142,000 last month, missing economists’
median expectation of a gain of 225,000, after expanding by 212,000
in July.
"This jobs report is effectively meaningless for Fed policy. It’s
one weak month, but the trends still look healthy. We don’t really
see a big issue there," said Drew Matus, an economist at UBS in New
York.
Fed Chair Janet Yellen said in a speech at an annual conference in
Jackson Hole, Wyoming, on Aug. 22 that the U.S. central bank should
move cautiously in deciding when to raise interest rates given that
the country's labor market remains bruised from the Great Recession.
The Fed's next policy meeting will be held on Sept. 16-17.
In the survey, eight of 15 Wall Street firms expected the Fed would
stop reinvesting the proceeds from maturing bonds it holds on its
roughly $4.5 trillion balance sheet in 2016, with six of those
believing the halt would occur in the first quarter of that year.
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The number of Wall Street firms that expected the halt in
reinvestments to occur in 2016 was slightly fewer than it had been
in early August, when nine of 16 dealers expected the move to occur
in 2016.
FED FUNDS SEEN TOPPING OUT AT 3.75
The median forecast among dealers for the federal funds rate at the
end of next year was 1 percent, while the median forecast for the
end of 2016 was 2.50 percent. The median forecast for the federal
funds rate's upper limit was 3.75 percent.
Since December 2008, the Fed has targeted a range of zero to 0.25
percent for its key funds rate.
Among 14 primary dealers, the median forecast for the Fed's
long-term neutral target rate, which is seen as a level that
promotes growth without stoking inflation, was 3.50 percent. This
was below the current 3.75 percent estimate from Fed officials,
based on their median June forecast.
(Additional reporting by Michael Connor, Gertrude Chavez-Dreyfuss,
Daniel Bases, Ryan Vlastelica, Sam Adams, Akane Otani and Richard
Leong in New York; and Hari Kishan and Kailash Bathija in Bangalore;
Editing by Leslie Adler)
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