The Federal Reserve Board will stop raising short-term interest rates early next year, investment managers predict.[@@]

Of investment managers responding to the latest quarterly poll by Russell Investment Group Inc., Tacoma, Wash., 67% expect the Fed to end its pattern of raising interest rates once the rate reaches 4.5% or 4.75%.

That could happen when the Fed next meets at the end of January or perhaps at its scheduled meeting in March, Russell points out.

“The fear that the Fed, under new chairman Ben Bernanke, might damage economic growth in the course of its current tightening cycle has clearly abated,” said Randy Lert, chief portfolio strategist for Russell.

For the survey, Russell polled senior investment decision-makers at U.S. large and small cap equity investment managers, as well as U.S. fixed-income investment managers. More than 110 managers took part in the survey.

Due largely to their confidence about an end to Fed rate-tightening, the managers also were decidedly bullish about the outlook for the financial services industry next year.

Managers who were upbeat on the sector increased to 40% in the fourth quarter from 26% in the last quarter.