Most Wall Street firms see U.S. rate hike in second quarter 2015: Reuters poll

Fri Sep 5, 2014 6:30pm EDT
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By Sam Forgione

NEW YORK (Reuters) - A majority of Wall Street's top bond firms see the Federal Reserve starting to raise interest rates by the second quarter of next year, showing slightly more aggressive expectations compared with a month ago, a Reuters survey showed on Friday.

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.   Continued...

The sun rises to the east of the U.S. Federal Reserve building in Washington, July 31, 2013. REUTERS/Jonathan Ernst