Fed to proceed with December U.S. rate rise despite Trump upset: Reuters poll
A stunning upset by Republican Donald Trump in the U.S. presidential election may have set off a few tremors in markets but the Federal Reserve is on course to raise interest rates next month, a Reuters poll of economists showed.
While there was no prior official view on what the Fed would do if Trump won in a contest where nearly every poll of U.S. voters pointed to a victory for Democrat Hillary Clinton, many had said ensuing uncertainty from an upset might put up a roadblock.
But roughly 85 percent of 62 respondents in a survey taken on Wednesday after the shock vote said the Fed would go ahead with a rate rise, its first in a year. Forecasts came from several of the Wall Street primary dealers as well as European analysts.
"We think economic conditions and Fed rhetoric both point to going in December," said Jeremy Schwartz, economist at Credit Suisse in New York.
When the Fed last hiked, its first in the current cycle off the zero bound, it expected to have delivered four more by now, but was thrown off course several times throughout the year. Inflation has not picked up as the Fed expected, either.
"We are not going to rush into changing our call for a rate hike at the December meeting," noted Jim O'Sullivan, U.S. economist at High Frequency Economics, the most accurate forecaster on the U.S. economy in Reuters polls last year.
Chicago Fed President Charles Evans said on Tuesday only a "pretty sizeable" negative surprise would convince the Fed to hold off from raising rates.
"Beyond December, our forecast for Fed tightening in the year ahead may have to be raised rather than lowered if the sell-off in equities is limited and the economy remains resilient but Congress still cuts taxes significantly," O'Sullivan said.
"For now, though, downside risks look much greater than upside risks."
Optimism the economy is strengthening, however, has not been thrown off course, at least not this soon after the election result.
The consensus view from the latest Reuters poll was for three Fed rate rises between now and the end of next year, which would bring the fed funds rate to 1.00-1.25 percent if they move in gradual 25 basis point increments.
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