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US may raise rates within six months: survey (AFP/File)

WASHINGTON (AFP) – The US Federal Reserve is expected to hike benchmark interest rates within six months as the economy recovers from one of the most brutal recessions, a poll among economists showed Monday.

When asked what monetary policy posture they would prefer in the next six months, 63 percent of 203 economists of the National Association for Business Economics (NABE) surveyed said they expected the Federal funds rate to be raised, with most expecting a hike of a quarter to half percentage point.

The Federal Reserve slashed the benchmark interest rate that banks charge each other for loans to a range of zero to 0.25 percent at the end of 2008 as the nation grappled with a major financial crisis after a home mortgage meltdown.

The March 2010 NABE policy survey revealed that "two-thirds of the respondents believe that Federal Reserve monetary policy is appropriate at the moment," the association said in a statement.

"However, a majority believes that a rise in interest rates is both likely and appropriate in the next several months."

The US central bank's next policy-setting meeting will be held on March 16 but many analysts expect the rate to be maintained even as a variety of other programs to restore credit flows are gradually being wound down.

The central bank raised its discount rate for emergency bank loans by a quarter point last month but indicated that this was not a sign of tightening of overall policy.

The NABE poll also showed that eight out of 10 economists did not believe another stimulus package is warranted.

In the event that an initiative were to be adopted to contain unemployment currently at nearly double digit rates, "the top policy choice for effective job creation would be the elimination of capital gains taxes on small business," the statement said.

President Barack Obama's administration launched a nearly 800 billion dollar stimulus package last year to jolt the economy from recession.

The economy began to grow again in the second half of last year, at 2.2 percent in the first quarter and 5.9 percent in the final quarter.

The Fed last month revised upward its growth projections in 2010, estimating a range of 2.8 percent to 3.5 percent as the economy.

The NABE survey also underscored fiscal concerns among economists, with eight out of 10 suggesting that the long-term imbalance of the federal budget might impact the country?s ability to borrow.

The United States will chalk up a wider budget deficit than projected by Obama over the next decade, new estimates by Congress showed Friday.

Under Obama's latest budget projections, the cumulative deficit over the 2011-2020 period would be 8.532 trillion dollars, or 4.5 percent of gross domestic product, the nation's economic output.

But new estimates by the Congressional Budget Office showed the deficit would snowball to 9.761 trillion dollars or 5.2 percent of GDP.

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