Wall Street banks now eye December for Fed rate liftoff: Reuters poll

[NEW YORK] After the Federal Reserve decided to leave interest rates unchanged on Thursday (Sept 17), a majority of Wall Street's top banks now expect the US central bank to begin hiking rates in December, according to a Reuters poll.

Twelve of the 17 primary dealers, or the banks that deal with the Fed directly, polled said they expect the Fed to raise rates in December. Two pegged the date in October, and three in March 2016. "We view this as a tactical delay and have pushed out our forecast of the first hike to December. However, we still expect the Fed to hike faster than the market is pricing in, with four hikes in both 2016 and 2017," wrote economists at Bank of America-Merrill Lynch, who moved their expected first increase to December from September.

The US central bank said an array of global risks and other factors led it to avoid a hike, which would have been the first in nearly a decade. The Fed's benchmark rate has been held in a range of zero to 0.25 per cent since December 2008.

The Fed maintained its bias toward a rate hike sometime this year. It has policy meetings in October and December.

In a poll conducted earlier this month, seven banks had expected a rate increase in September. Among the seven that had expected a September hike, three moved to December, one to October and one moved to March.

The poll was conducted following the Fed's statement and press conference on Thursday afternoon.

REUTERS