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Congressional Budget Wonks to Fed: You Probably Aren't Going to Raise Rates as Fast as You Say

Not even the U.S. Congressional Budget Office is buying the Federal Reserve's projected path for interest rates in coming years, starting with some central bankers' insistence that a hike next month is possible.

In the latest update of its budget and economic outlook released on Tuesday, the CBO said it expects the central bank to hold its target for the federal funds rate at 0.25 to 0.5 percent until the fourth quarter of this year before raising it.

The non-partisan CBO, which provides budget and economic analyses to Congress, also sees a slower increase in rates over 2017and 2018 than central bankers did in their last projections in June. (Fed policy makers will update their forecasts at their next meeting on Sept. 20-21.)

The latest CBO estimates represent a marked reduction from its forecast in January, when it saw the funds rate reaching 3.2 percent at the end of 2018, compared with its 1.8 percent estimate now.

The budget office said its lower rate forecasts reflect slower-than-previously-expected economic growth and ongoing uncertainty in the wake of the U.K.'s vote to leave the European Union.

The budget analysts' rate projections are still higher than those implied by trading in the federal funds futures market. Participants in that market are betting that the funds rate will stay below 1 percent through the end of 2018.

German Ifo business climate unexpectedly drops in August

German business confidence registered an unexpected deterioration in August, falling to a 4 month low, industry data showed on Thursday.

In a report, the German research institute Ifo said its Business Climate Index fell to a seasonally adjusted 106.2 this month from a reading of 108.3 in July, missing forecasts for a rise to 108.5.

The monthly index is based on a survey of around 7,000 German firms in the manufacturing, construction, wholesale and retail sectors.

Oil traded slightly lower.

Oil prices dipped on Thursday, extending the previous day's decline, as the market focus returned to a global supply overhang, although a surprise fall in Chinese crude inventories did lend some support.

U.S. West Texas Intermediate (WTI) crude futures were at $46.73 a barrel, down 4 cents, after dropping 2.8 percent on Wednesday.

Traders said that a surprise decline in Chinese crude stocks in July, which fell 5.7 percent from June, to 28.9 million tonnes (around 212 million barrels) and their lowest level since April 2013, lent an otherwise weak market some support.

Reference: Bloomberg,Investing,Reuters