Predicting the action of the US Federal Reserve on interest rates is one of the riskiest undertakings. Some say it is as much a science as it is an art. Still, this week’s likely action is possibly the most telegraphed as the majority of Fed watchers say a hike is certain.

The question is how many rate hikes are we likely to see in 2017 and what level will they be by the end of the year? Since 2014, Asset Benchmark Research has asked an investor panel for their prediction on the Fed fund rate outlook. The latest survey conducted in October 2016 asked institutional investors where they expected the Fed funds rate to be in September 2017.

Close to half of the fund managers (44%) priced in two rate hikes and expected the lower bound to be at 0.75% over the year-long period. Three out of ten were more optimistic and expected a 25-basis point rise during this time, while 16% thought the Fed would maintain a hawkish stance and close the third quarter with an interest rate range of 1% to 1.25%.

“I think they will hike three to four times this year. I’ve got a bet with someone that it’s four times. I would say I’m bearish rates,” a Hong Kong-based trader at a global fixed income fund house says.

“There was talk about Chinese money leaving. So, accommodation certainly saw people a little more cautious heading into 2017, which I’d say was something that we saw differently I think,” says a portfolio manager at a local fund arm in Hong Kong that expected three hikes. 

Another Singapore-based fund manager at a large private bank with the same prediction explains: “We’re obviously in the late part of the cycle of economic growth in the US. So, we’re going to see much stronger economic data on the Purchasing Managers Index (PMI) front and the inflation front, and there’s just going to be a natural reaction from the Fed to tighten and finally try to normalize rates to what they want it to be.”

Only a handful of investors have predicted that rates will rise to greater than 1% at the lower bound by the fourth quarter of this year (4%). However looking at the trends in the past six months of the surging stock market, positive US job growth data and potential fiscal stimulus by the Trump administration, this outcome is becoming less outlandish as the year progresses.

The Asian G3 Bond Benchmark Review, now in its 16th year, was conducted in the third quarter of 2016. A total of 352 Asian G3 bond investors including asset managers, hedge funds, private banks, insurance funds and commercial banks from Hong Kong, Singapore, the rest of Asia, UK/Europe and the US took part.