Respondents saw a 45 percent chance the first rate increase would occur in the second quarter of 2014 or later, according to the results posted today on the New York Fed’s website. The median among the predictions for the timing of the first increase was the second quarter of 2014, the bank said in a statement. The Fed has kept its benchmark interest rate near zero since December 2008.

The December survey asked primary dealers the probability that central bankers would make changes to their public communications within the next year. Fed officials decided at the last meeting of the Federal Open Market Committee to start publishing their own forecasts for the central bank’s key interest rate, according to minutes of the gathering released yesterday.

“While most dealers did not expect any policy changes at the December meeting, some suggested the FOMC could change its communication strategy, and a few saw a change in the guidance on the future path of the federal funds rate as likely,” the New York Fed said in a statement.

The questions for the December survey and its predecessors for the seven other Fed policy meetings in 2011 were published last month as part of “ongoing efforts to increase transparency,” the regional Fed bank said in a statement at the time.

Tightening Tools

The 21 dealers were asked about the probability the Fed would use each of 11 easing or tightening tools at the FOMC meeting in December, and within one year or two years.

The median respondent saw a 60 percent chance that the Fed would expand its balance sheet through securities purchases within one year, and 40 percent odds the central bank would “provide guidance” within a year on the timeframe for the central bank’s portfolio to remain at its current size, the results showed.

Primary dealers also saw a 25 percent likelihood that the U.S. economy would be in a recession within six months, according to the median response. They saw a 10 percent chance that the U.S. economy was currently in a recession.

The question on the communications changes was one of two major differences in the December survey from the prior survey ahead of the Fed’s Nov. 1-2 policy meeting.

To contact the reporter on this story: Caroline Salas Gage in New York at csalas1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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