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First rate hike now likely in August: CNBC Fed Survey

The Fed has run out of patience.

So say respondents to the CNBC Fed Survey, more than two-thirds of whom see the Fed dropping the word from the policy statement in March. The word has been used by the central bank to signal no rate hike for at least two meetings.

"The FOMC is ready to answer the question: 'Does the economy still warrant zero interest rates?' with a resounding 'NO,'" wrote John Donaldson of Haverford Trust.

Read More Rate hike now seen in September: CNBC Fed survey

The 38 respondents, who include economists, analysts and money managers, also now see the first rate hike coming in August, a month ahead of the prior survey, and it forecasts a somewhat steeper rate of interest rate increases over the next several years.

But rates are still forecast to rise gently, peaking at 3.04 percent in this cycle by the fourth quarter of 2017, a quarter earlier than the survey in January. "It will take the Fed years to normalize rates," said Scott Wren of Wells Fargo Advisors. "This cyclical bull market still has room to run.''

But Wall Street thinks the Fed is behind the curve, with 54 percent saying the Fed is "too accommodative," the first time the percentage has been above 50 percent. The 32 percent who say policy is "just right" represents an all-time low and a 15 point drop from January.

James Paulsen of Wells Capital Management thinks foreign economies could strengthen more than expected, prompting increases in commodity and oil prices. "If this happens as wages begin accelerating and as the U.S. unemployment rate nears 5 percent, Wall Street will increasingly fear the Fed is far behind the curve," he wrote in response to the survey.

Read More Fed fear factor, ECB could keep markets turbulent

Yet, there were some contradictory findings in the survey. The chance of recession in the next 12 months jumped more 3 points to 16.4 percent, from an all-time survey low to the highest it's been in a year. Respondents also shaved their growth forecast for this year to 2.7 percent, from 2.8 percent, further from the Fed's 3 percent forecast. The combination of lower oil prices and a strong dollar has respondents pushing down their core inflation forecast to just 1 percent this year, further away from the Fed's 2 percent target.

"We see the first rate hike in September as we think the Fed may want to see core PCE inflation finding a floor, which is unlikely before the summer," said Thomas Costerg of Standard Chartered Bank.

Global economic weakness and slow wage growth in the U.S. are seen as the biggest threats to the U.S. economy, with the threat from Europe itself far lower than it was late last year.

The sense of a reduced threat from Europe comes at a time when there are greater fears Greece will leave the euro zone. Respondents judge there's a 41 percent chance that will happen in the next three years, compared with just 13 percent for Portugal and 9 percent for Italy.

Little overall concern about Europe amid a high probability of a Greek exit could be a measure of success for the European Central Bank's new trillion euro quantitative easing policy.

Markets are divided over whether the QE program is big enough to get inflation back up to 2 percent, with about a third saying it's sufficient and 36 percent saying it's not big enough.