Reuters: Economic News: Primary dealers moved back rate hike view in March

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Primary dealers moved back rate hike view in March Apr 4th 2012, 18:47 By Chris Reese and Emily Flitter NEW YORK | Wed Apr 4, 2012 2:47pm EDT NEW YORK (Reuters) - Wall Street firms authorized to deal directly with the Federal Reserve nudged their expectations for the Fed's first interest rate hike further into the future last month, the Federal Reserve Bank of New York revealed on Wednesday. U.S. primary dealers on average saw the highest probability of the first U.S. interest rate increase in the second half of 2014, according to a March survey conducted by the New York Fed. The responses to the same survey in January showed dealers expecting the first rate hike in the first half of 2014. The dealers also moved back their median expectation for the timing of the Fed's first rate hike. They saw the third quarter of 2014 as the median for the first rate increase, compared with the January survey results in which the second quarter of 2014 was the median expectation. The survey was conducted before the Fed's March 13 policy meeting. At the close of that meeting, the Fed said it would likely keep rates at rock-bottom levels until at least late 2014. But the statement from the Federal Open Market Committee was more upbeat about the prospects for the U.S. economy and Wall Street viewed it as a negative for the likelihood of more easing measures by the Fed. Treasury securities sold off after the FOMC statement, bringing the benchmark 10-year yield back above 2 percent and eventually sending it to six-month highs. While dealers' expectations for the first rate hike moved slightly farther out, their forecasts for the unemployment rate revealed some of the opposite sentiment. In January, the median forecast for the 2012 unemployment rate on a fourth quarter to fourth quarter measure was 8.5 percent. By the March survey, it had fallen to 8 percent. The dealers expected 7.6 percent for 2013 compared with January's median of 8.1 percent, and 7 percent for 2014, according to the survey. The government said last month the unemployment rate was 8.3 percent in February. The U.S. Labor Department will release the unemployment report for March on Friday. (Editing by James Dalgleish) Link this Share this Digg this Email Reprints

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