Two-thirds of economists expect Fed to raise rates by end of year

Nearly two-thirds of economists expect the Federal Reserve to raise US interest rates before the end of the year, even though several banks have warned weakening economic data put its inflation target in doubt.

Despite a tempering in the US labour market, 65 per cent of 46 economists from leading banks in the US, Europe and Asia polled by the Financial Times said the Fed would increase the federal funds rate at its December meeting.

The view is in contrast to market expectations, which have played down the chance of tighter monetary policy before next year. Recent comments from top Fed officials have cautioned against prematurely tightening monetary policy.

More than half of the economists said the Fed risked a policy mistake this year, although they were split on whether the error was lifting too soon or too late. Several said weakening economic data – including retail sales – and muted inflation underscored the need to wait.

None said they expected the Fed to lift rates after its meeting on October 28th. More than 85 per cent said the Fed would have lifted rates twice by the end of its June meeting next year.

Copyright The Financial Times Limited 2015