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Market volatility will cause Fed to delay next rate hike, Wall Street experts say in survey

 
Published Jan. 27, 2016

WASHINGTON — Volatile financial markets will cause Federal Reserve policymakers to delay their next interest rate increase until spring and reduce the number of hikes in the next year to no more than two, Wall Street experts said in survey results released Tuesday.

There is no expectation that central bank officials will increase their benchmark short-term rate after a two-day policy meeting this week, the survey by CNBC found. The Fed will announce its decision today.

But the majority of the 40 economists, fund managers and analysts polled now expect the next small hike in the so-called federal funds rate will come later this spring instead of in March, as last month's survey found.

After the March 15-16 meeting, the Federal Open Market Committee next gathers in late April and then in mid June.

Fed policymakers nudged the rate up 0.25 percentage points in December, ending seven years of keeping the rate near zero to stimulate economic growth.

In their economic projections, a majority of the Fed's 17 policymakers anticipated four 0.25 percentage point increases this year. That would put the rate at about 1.4 percent by the end of 2016.

But 66 percent of the respondents in the CNBC survey predicted no more than two hikes this year, which would put that rate at 0.9 percent.

Falling oil prices and concern about slowing growth in China have caused stock indexes to tumble since the start of the year. Analysts said the prospect of rising interest rates in the United States also has weighed on investors.

About 80 percent of respondents in the CNBC survey said the December hike was the right move, with just 15 percent calling it a mistake.