Date
17 December 2017
Market observers will be looking to Janet Yellen for any new clues about a liftoff after she convenes a June 6 -17 meeting of the Fed Open Market Committee. Photo: Bloomberg
Market observers will be looking to Janet Yellen for any new clues about a liftoff after she convenes a June 6 -17 meeting of the Fed Open Market Committee. Photo: Bloomberg

Economists see 40% chance Fed will delay liftoff past September

Economists are predicting a 40 percent chance that the Federal Reserve will postpone an interest rate increase beyond September.

They said the delay will happen if the job market stumbles or inflation remains stagnant, Bloomberg reported Wednesday, citing its own survey.

“If labor markets for some reason stalled, you would get a delay,” said Michael Gapen, chief US economist of Barclays Plc. in New York.

He is predicting a two-thirds probability of a rate rise in September.

“I think labor market conditions justify a move,” he said.

Fed officials are studying the latest economic data to determine whether a first-quarter contraction was a sign of longer-lasting weakness in the world’s largest economy.

Benchmark rates have remained near zero since 2006

Stronger than forecast payroll growth in May helped ease concerns but did not erase them.

Economists surveyed from June 5 to 9 put the probability of a September increase in the benchmark federal funds rate at 50 percent, according to the median estimate.

The odds are 9 percent for October, 20 percent for December and 10 percent for some time in 2016.

Some investors making bets on interest rate futures have a more hawkish view.

The market-implied probability of liftoff by September is somewhere between 93 percent and 100 percent, the report said, citing Stan Jonas, who has been trading fed funds futures since he helped create them in 1988.

The Federal Open Market Committee holds its next meeting June 16-17 and Fed chief Janet Yellen will hold a press conference afterwards.

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