Fed Raises Economic Outlook, Leans Toward 2014 Rate Hike

WASHINGTON (AP) -- The Federal Reserve has boosted its outlook for U.S. economic growth this year and is slightly more optimistic about the unemployment rate, reflecting improvements in recent months....

Douglas Porter, BMO Capital’ chief economist “Recognizing the obvious, the Bank has softened its mild tightening stance further. Still, even with GDP growth of barely 1% and core inflation at near-record lows, the Bank is maintaining that the next move in rates will likely be higher. That next move now looks to be very far off however, and we remain comfortable with the call that rates are unlikely to begin moving higher until the second half of 2014.”

By Sy Harding:In his widely covered speech two weeks ago, Fed Chairman Bernanke said the anemic U.S. economic recovery seemed to be continuing, but that the Fed was suspicious of the positive employment reports of recent months. His actual words were "the better jobs numbers seem somewhat out of synch with the overall pace of the economic expansion." Later in his speech he referred to the improvements in the jobs picture in relation to the anemic economic recovery as "a puzzle."

OTTAWA — As swan songs go, Mark Carney’s final performance as the head of Canada central bank was a little flat. But that was to be expected. After all, Mr. Carney is only days away from passing the baton to the next Bank of Canada governor, Stephen Poloz. The handover needed to be steady. So on Wednesday, Mr. Carney and his policy team did what they have done since September 2010, holding the bank’s trendsetting lending rate at 1%.

Another major bank in Canada is pushing back its forecast for when the Bank of Canada will begin hiking its benchmark interest rate. CIBC said on Monday that it now predicts the bank won’t hike its key rate, which affects everything from mortgages to car loans, until the third quarter of 2014.

TORONTO — Half of Canada’s primary dealers have recently pushed back forecasts for the timing of the central bank’s next interest rate hike, a Reuters poll showed on Friday after weak jobs and housing starts data suggested the economy will struggle in 2013. The economic figures released on Friday were the latest in a string of dismal indicators. Earlier reports had prompted the Bank of Canada to say on January 23 that a rate hike would be further in the future than it had once thought.

TYLER COWEN points us to the blogger at Sober Look, who thinks markets aren't buying the Fed's low-rate communications:Misconceptions still persist that the Fed is on hold with respect to rates until at least late 2014. The markets would disagree. The Fed Funds futures have the first rate hike (25bp) centered around August of next year and the second hike (to 50bp) on July of 2014....

Private equity behemoth Kohlberg Kravis Roberts & Co. (KKR)  recently published its outlook for 2013. "[W]e are somewhat pessimistic relative to the consensus on earnings growth in early 2013," writes Henry McVey, KKR's Head of Global Macro & Asset Allocation.