Janet Yellen

SIFMA Economists Expect No June Rate Hike, Brexit

Ninety percent of the Securities Industry and Financial Markets Association’s Economic Advisory Roundtable expect the Federal Open Market Committee to not increase interest rates tomorrow, and none of the members expect a British exit from the European Union on June 23. Two-thirds of the members surveyed predict a rate hike in the third quarter of this year.

SIFMA’s Economic Advisory Roundtable is made up of chief U.S. economists from 22 SIFMA member firms.

Close to half of the roundtable’s members say there will be only one rate hike this year, while the other half expect the Fed to raise rates twice this year—once in the summer and once in the fourth quarter.

Two-thirds of respondents expect two-to-three rate hikes in 2017, with the remainder expecting four. No one expects only one rate hike or any kind of rate cut next year.

“Asked when the Fed’s complete reinvestment policy would end, views were mixed, with responses ranging from the fourth quarter of 2016 to the second quarter of 2019, with most clustered around late 2017 or early 2018,” the SIFMA report said. “One respondent noted that, ‘the latest guidance from Dudley is that he would like to be ‘some ways’ above zero on the target rate before turning to the balance sheet. Taken at face value this would imply balance sheet remains steady for a few more years.’”

None of the roundtable members expect a Brexit, a United Kingdom exit from the EU, which goes to vote June 23.

“Concerns with recent polls going on now are partly feeding into what we might call ‘a mini melt-up’ in Treasury bond prices and German bund prices to where the rates are coming down,” said Stuart Hoffman, senior vice president and chief economist, PNC Financial Services Group, and chairman of SIFMA’s Economic Advisory Roundtable.

Overall, respondents predict U.S. GDP growth of 1.8 percent this year, a downward revision from 2.5 percent that was forecast in the year-end 2015 survey. This was due to weaker than expected growth in the first half of the year. GDP is expected to strengthen to 2.3 percent in 2017. 

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