Fed to hold rates ahead of November election; inflation still low: Reuters Poll
The U.S. Federal Reserve will wait until the fourth quarter before raising interest rates, likely in December after the presidential election, according to a Reuters poll which once again showed subdued inflation expectations.
That would mark a climb-down from the four hikes in 2016 Fed policymakers had estimated at the start of the year and highlights the challenges they face despite a solid economy, with global risks rising after Britain's vote to leave the European Union.
Just over half the 100 economists surveyed over the past week expect the Fed to raise its federal funds rate in the fourth quarter to 0.50-0.75 percent from 0.25-0.50 percent currently. The move is most likely to come in December as the November policy meeting is only days ahead of the Nov. 8 election, forecasters said.
The rest of the respondents are split between forecasting a rise in the third quarter of this year -- likely in September as the Fed has given no hint it is about to raise rates at its meeting this month -- and sometime in 2017.
Forecasts for a rate rise this year have already been pushed back three times since January, when a Reuters poll predicted one would come no later than March. The Fed's peers from Europe to Asia, meanwhile, are still easing.
"All Fed commentary to date has suggested they will proceed very patiently and very gradually in normalizing policy. Our sense is the Fed might be extra cautious moving on rates close to the election since they'll have to be seen as politically neutral," said Sal Guatieri, economist at BMO Capital Markets.
"Based on our view of how the economy will perform over the next six months and (considering) the U.S. is pretty close to full employment now ... December is probably as good a time as any to move next."
The poll forecast two more rises next year, taking the fed funds rate to 1.00-1.25 percent at the end of 2017.
Brexit dents global economic outlook, fiscal stimulus ahead: Reuters poll
Confidence in prospects for the global economy has been dented following Britain's vote to leave the European Union, with a growing view that monetary policy is a fading force and many governments now need to borrow and spend, Reuters polls showed.
Broad worries about political risks are also on the rise everywhere and not restricted just to Brexit's repercussions and a failed coup in Turkey. The United States is entering a period of heightened uncertainty too, leading up to November elections.
The overarching worry is this more dangerous phase is coming at an unwelcome time, when central bankers don't have anywhere near the clout they had after the collapse of Lehman Brothers to deal with another major economic or financial downturn.
"Given how fragile the global economy is nearly eight years after the start of the global financial crisis, the last thing it needed was the type of jolt provided by the UK's Brexit vote," wrote Janet Henry, global chief economist at HSBC.
"We suspect fiscal policy will likely have a larger role to play in many countries from here."
Reuters polls of above 500 economists across Asia, Europe and the Americas reveal downgrades, or at best no change to growth forecasts compared with previous months, as well as an incrementally weaker inflation across most countries.
The outlook for global growth this year has held at 3.0 percent, but was trimmed by 0.1 percentage point to 3.2 percent for 2017, weaker than the 3.4 percent forecast this week by the International Monetary Fund.
IMF's Lagarde says global growth forecast revised downward on Brexit
International Monetary Fund Managing Director Christine Lagarde said on Friday Brexit meant the global growth forecast was revised down and that uncertainty from Britain's decision to leave the European Union should be removed as soon as possible.
She made the comments at a briefing after meeting China's Premier Li Keqiang and the head of the World Bank and other senior global economic officials.
Oil futures up slightly, face weekly decline as glut fears persist
Crude oil futures rose in quiet Asian trading on Friday but gains were limited following big falls in the previous session as investors reassessed U.S. data underlining the glut in petroleum, while Iraqi crude exports are on the rise.
Brent crude was up 14 cents at $46.34 a barrel. The global benchmark closed 97 cents, or 2.1 percent, lower on Thursday. Brent is on track for a decline of nearly 3 percent this week
Reference: Reuters
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