president-elect donald trump <u+2019>s surprise victory is unlikely to cause the federal reserve to hold off raising short-term interest rates in december, according to a survey of economists conducted after the u.s. election. nearly every business and academic economist polled in a recent wall street journal survey expected the fed to move borrowing costs higher at its<u+00a0>dec. 13-14<u+00a0>meeting. the 96.5% of economists who saw an impending rate increase was up from 83.1% who held that view in the october survey, conducted before the nov. 8 vote. the fed held rates steady at its nov. 1-2 meeting, but sent new signals that officials could move at their next meeting given firming inflation. the central bank last raised its benchmark rate to a range between 0.25% and 0.5% in december 2015, after keeping it near zero in the years following the 2008 financial crisis. mr. trump<u+2019>s election last week initially raised questions about whether the change of economic direction ushered in by a new, republican administration would halt the fed<u+2019>s plans to increase rates in december, or even spell an end to janet yellen <u+2019>s tenure as chairwoman given mr. trump<u+2019>s jabs at the fed leader during his campaign. far from it, according to economists surveyed by the journal last wednesday through<u+00a0>friday. of 57 economists polled, just two expected that the central bank would wait until next year to raise rates. <u+201c>with the election determined, a solid labor market and creeping inflation, the fed has the opportunity to begin rate hikes anew in december,<u+201d> said rajeev dhawan, an economic forecaster at<u+00a0>georgia state university. economists predicted on average that the fed<u+2019>s benchmark federal-funds rate would rise to 0.62% by the end of the year, 1.17% by the end of 2017 and 1.93% at the end of 2018. that suggests one quarter-percentage-point increase this year, two in 2017, and at least three in 2018. mr. trump has pledged tax cuts and higher spending on defense and infrastructure. several economists said in their survey responses they expect the greater government spending to cause higher inflation by boosting demand, meaning the fed would have to raise rates to keep inflation in check. <u+201c>trump<u+2019>s economic plans mean higher inflation and a fed playing catch-up,<u+201d> said joel l. naroff, an economist at naroff economic advisors. the fed came under intense criticism from mr. trump during his election campaign. he accused ms. yellen of keeping interest rates low to help the obama administration<u+2014>allegations she repeatedly rejected<u+2014>and mr. trump said he would likely seek to replace her with a republican when her term is up in early 2018. economists surveyed last week expected ms. yellen to stick out her tenure. nearly three-quarters of those polled said it was either unlikely or very unlikely that she would leave the central bank before her term ends. doing so <u+201c>would severely undermine fed independence,<u+201d> said jim o<u+2019>sullivan, chief u.s. economist at high frequency economics. <u+201c>with chair yellen<u+2019>s term ending in a little over one year, there is little incentive for the incoming administration to roil global markets by demanding her resignation,<u+201d> said louis crandall, an economist with wrightson icap llc. <u+201c>given how chaotic the initial staffing process for new administrations has become, having the fed chairmanship staggered by one year is probably just about right,<u+201d> he added. the makeup of the federal reserve is also under scrutiny given the change in administration. two seats have been vacant on the central bank<u+2019>s powerful, seven-member fed board of governors for over two years. several other seats could open up during mr. trump<u+2019>s<u+00a0>four-year presidency as current governors<u+2019> terms expire, or if they choose to leave the fed early. economists surveyed in recent days were divided on how aggressive they expect mr. trump<u+2019>s future nominees to be on tackling inflation. more than half expect the nominees to be hawkish or very hawkish, while 30.8% expect them to be <u+201c>neither hawkish or dovish,<u+201d> and 13.5% expect them to be dovish or very dovish. that could reflect mr. trump<u+2019>s differing statements on the merits of low interest rates. in may, mr. trump described himself as <u+201c>a low interest-rate person,<u+201d> but he said in early november that <u+201c>janet yellen should have raised the rates.<u+201d> write to harriet torry at harriet.torry@wsj.com
wsj survey: most economists see fed raising rates in december, in wake of trump<u+2019>s election  - wsj
harriet torry