25% of dealers that do direct business with the Fed think rates will be back at 0% within 2 years

Thomson Reuters

(Reuters) - The Federal Reserve's next policy move is much more likely to be a rate hike than a rate cut, although over the next two years a return to zero rates is a rising possibility, according to a New York Fed survey of primary dealers published on Thursday.

The regular survey, done last month before the Fed's Jan. 27 decision to keep interest rates on hold, found that primary dealers see about a 75 percent chance that the Fed's next policy move will be to increase that rate, with just over half expecting that rate hike to take place at the Fed's March meeting.

The 22 primary dealers, or those that do direct trading with the Fed, saw about an 8 percent chance that the Fed's next move would be a rate cut and put the chances of no rate move at all in 2017 at about 17 percent.

The survey showed economists assigned a 14 percent chance of the U.S. falling into recession in the next six months and thought there was about a one in four chance that U.S. interest rates would be back at zero at some point over the next two years. 

Both of those probabilities were at the highest level in at least a year, based on a review of prior surveys. 

The Fed raised its benchmark interest rate to 0.25%-0.50% from 0%-0.25% in December 2015.

(Editing by Cynthia Osterman)