"Most economists believe the FOMC will raise the federal funds rate in the second half of 2015, although nearly a third would prefer to see the lift off come sooner"
-Peter Evans, NABE Policy Survey Committee Chair
While the government's non-farm payrolls data showed US employers created more jobs than expected in February, the Fed's own composite gauge of conditions in the US labour market dropped in February. The labour market conditions index declined to 4 points, the worst result since August and following a downwardly revised 4.8 points in December. The LMCI is based on 19 indicators, with monthly change to payrolls and the unemployment rate having the biggest weight. Thus, the fall in the index came as a surprise, given the robust labour market data last week.
Meanwhile, more economists believed the Fed's policy is appropriate. According to the National Association for Business Economics, 58% of economists thought the Fed's approach was "about right", compared with 53% in August. Around 36% said monetary policy was too stimulative, down slightly from 39% in August. Some 71% of the 293 respondents predict the Federal Open Market Committee policy makers to hike interest rates sometime this year. 62% of the NABE's survey participants believe the first rate hike will take place in the second half of this year, up from 34% in August last year. A quarter anticipated the central bank to maintain current policy course until 2016 or later, while only 9% expect the FOMC raising rates in the first half of 2015.
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