U.S. growth seen picking up; rate hike expected in Sept: Reuters Poll

WASHINGTON (Reuters) - U.S. economic growth is set to pick up after a lackluster first half, allowing the Federal Reserve to raise interest rates in September, according to a Reuters poll published on Thursday.

Activity slumped at the start of the year but picked up moderately in the second quarter, strengthening views the Fed would raise interest rates.

"The first rate hike from the Fed will be coming before too long," said Scott Anderson, chief economist at the Bank of the West, adding a September raise would be appropriate.

However, with inflation pressures tame the pace of monetary policy tightening is likely to be gradual and the survey saw the midpoint of the federal funds rate at 0.375 percent by end-September, 0.625 percent at the turn of the year and 1.125 percent in 12 months, unchanged from a June poll.

Around two-thirds of economists said the biggest challenge to the Fed's anticipated rate hike trajectory would be an unexpected slowdown in the U.S. economy. Eight said the biggest challenge would be no significant pickup in wage growth, while two said there were no challenges at this time.

The Fed's policy-setting committee meets next week, but disappointing retail sales, turmoil in international markets and a strengthening dollar are among reasons why most say the economy is not ready for a hike just yet.

"Rates of inflation remain very subdued and employment conditions are not improving quite as significantly as the unemployment rate and changes in nonfarm payrolls suggests," said Hugh Johnson, of Hugh Johnson Advisors.

The survey of 81 economists again forecast economic growth would average 2.3 percent this year, unchanged from a June poll, while unemployment - which currently sits at 5.3 percent - is expected to average that in 2015 then drop to 4.9 percent next year and to 4.8 percent in 2017, according to the poll.

The personal consumption expenditures price index excluding food and energy was forecast averaging 1.3 percent this year and 1.7 percent in 2016. Forecasts for other economic indicators were little changed from previous estimates.

(Additional reporting by Lucia Mutikani; Polling by Aaradhana Ramesh and Hari Kishan; Editing by Chizu Nomiyama)