Wall Street sees Fed rate hike by year-end after jobs data: Reuters poll

Fri Oct 7, 2016 5:50pm EDT
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NEW YORK (Reuters) - A solid U.S. jobs report for September reinforced expectations among Wall Street's top banks that the Federal Reserve would raise interest rates by the end of the year, according to a Reuters poll conducted on Friday.

Fourteen of the 15 primary dealers that responded to the poll forecast a rate hike at the U.S. central bank's December meeting. Primary dealers are the banks that do business directly with the Fed.

This compared with 13 of 14 dealers in a similar poll done on Sept. 2 following the August jobs report.

"It's in line with what the Fed had expected. It keeps them on track to hike in December," Brett Ryan, an economist at Deutsche Bank in New York, said of the September payrolls report.

Looking beyond December, 10 of 15 economists forecast at least two rate hikes in 2017, compared with nine of the 12 economists in the Sept. 2 poll.

While a number of Fed officials have said the Nov. 1-2 policy meeting is "live," some of the analysts at the 15 primary dealers which responded downplayed the likelihood of a rate hike before a tight U.S. presidential election on Nov. 8.

"I can't imagine they want to inject themselves into the politics," said Omair Sharif, senior U.S. economist at Societe Generale in New York.

The median probability for a rate hike at the Fed's November meeting was 12.5 percent, down slightly from 15.0 percent in the prior Reuters poll.

The labor market, while far from robust, has showed resilience despite weak investment spending from companies and lackluster overseas demand for U.S. goods and services.   Continued...

The Federal Reserve Building stands in Washington April 3, 2012. REUTERS/Joshua Roberts/File Photo