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Most Private Economists Think FRB Will Keep Rates Near Zero Next Week
Monday, September 14, 2015 6:45 AM

Only 46 percent of business and academic economists surveyed by The Wall Street Journal predicted the Fed’s first rate increase would come at the Sept. 16-17 policy meeting. A majority predicted change would arrive at a later meeting. About 9.5 percent said October, while 35 percent said the first rate increase would come in December, and 9.5 percent 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 percent of economists thought the Fed would raise rates in September. On average, forecasters estimated the probability of a September rate increase at 42 percent. By comparison, futures markets (where traders make bets on the Fed policy outlook) signal only a 24 percent chance of the Fed raising rates this month.

Only a third of economists said the likelihood of a Fed rate increase next week was above 50 percent.

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," Lacker said, "but nor is it on the ropes, requiring the stimulus of low monetary policy interest rates to get it back into the ring.”

Source:  The Wall Street Journal