Fund managers have raised their estimate of a neutral federal funds rate to 3.8-3.9%, according to the latest global monthly survey from Merrill Lynch.Given that the current rate is 3.25% this means that to bring the level up to neutral – a rate that is neither stimulative nor restrictive – at least two more quarter-point rises would be necessary. This broadly tallies with the fact that 61% of managers expect short rates to be higher in a year’s time while 57% expect long rates to rise. The growing hawkishness on interest rates coincides with a more positive view on the macroeconomic outlook. Investor expectations for economic growth, profits and earnings projections have all improved after several weeks of positive news from America. Nevertheless fund managers still seem to believe that the global economy is moving towards the late stage of its cycle. Some 44% of managers say it is in a mid-cycle phase while 52% say it is already late cycle. In the regional survey, European specialists were upbeat about German economic restructuring, with 37% seeing a lot and 59% a little. In addition, 61% say the pace of restructuring is likely to accelerate if the Christian Democratic Union wins the expected election in the autumn. Another 30% say a CDU victory would have no impact. A total of 273 fund managers, with $917bn (527bn) under management, participated in the global and regional surveys from July 7-14. The surveys were conducted with Taylor Nelson Sofres, a market research company.