TD Bank economists say that they now expect that the U.S. Federal Reserve Board will likely wait until November to start raising rates.

TD Economics warns that the Fed will be pressing its luck by waiting too long to start pulling back the stimulus. And it cautions that the Fed is relying too much on renewed job growth for comfort that the recovery is well and truly underway; as job growth is a backward looking indicator.

Nevertheless, it expects that the Fed will rely on productivity growth and its reputation as an inflation fighter to keep inflation in check in the U.S.

TD economists caution that “the longer the Fed waits, the more it will have to scramble later on as the full force of last year’s interest rate cuts comes to bear.”

TD says that the recovery in the U.S. is definitely underway, and that it will gain momentum. So that, the Fed will start resorting to 50 basis point hikes as early as January 2003 to get policy back in neutral by the end of 2003.