(Bloomberg) -- Dominic Konstam isn’t sure about Deutsche Bank AG’s forecast that the Federal Reserve will raise interest rates in September -- and he works there.

Like many of their counterparts throughout the financial world, people inside Deutsche Bank are divided about just when the Fed will move. The bank’s economists, who espouse the official “house” view, say next month. Konstam, the interest- rate strategist, says it may be 2016.

“I always thought the Fed would struggle to raise rates this year,” Konstam said.

The split highlights the widening gap between those who take their cues from the bond market to gauge the prospects for U.S. growth and those who focus on economic indicators.

With China’s stock meltdown convulsing markets worldwide and commodities stuck near the lowest levels this century, bond traders pared back their inflation expectations as worries about a global slowdown deepen. They see the odds of interest rates rising before year-end at little more than a coin flip.

POLICY SURVEY

Yet to most economists, there’s no need for the Fed to wait as jobs and spending continue to pick up. Three-quarters of those surveyed by Bloomberg in August say the Fed will lift the upper bound of its target rate to 0.5 % at its Sept. 16-17 meeting. The median forecast sees four more increases over the next year.

While the survey was taken before markets went haywire, it was backed by data on Thursday, which showed the U.S. economy expanded more last quarter than previously reported.

An increase in borrowing costs would mark the end of the Fed’s near-zero rate policy, which has been in place since the financial crisis erupted in 2008.

HOUSE DIVIDED

“We don’t want to overreact to short-term volatility in the markets when nothing in the U.S. fundamental picture has changed,” said Brett Ryan, one of Deutsche Bank’s economists responsible for its official view on U.S. rates.

The bond market is telling a different story.

Well before last week’s upheaval, which was triggered in part by China’s surprise devaluation of its currency, traders were signaling that the U.S. was having an increasingly tough time generating the type of growth to spur inflation.

They poured into Treasuries during the tumult, pushing down yields on 10-year notes by more than a half-%age point from mid-June to mid-August. Yields fell to a low of 1.9 % last week before ending at 2.18 % on Aug. 28. The yield was 2.17 % as of 12:47 p.m. New York.

The decline underscores how bond traders see little chance inflation will reach the Fed’s 2 % goal any time in the next decade. Those expectations, which are based on the premium that bond buyers demand to own Treasuries over inflation- protected securities, fell as low as 1.44 % last week.

That was the weakest since May 2009, when the U.S. was still mired in the worst recession in decades.

Less inflation increases the real value of fixed-income payments over time. It also suggests that Fed officials may need to re-think their view that the effects of the commodities slump on inflation in the U.S. are transitory.

BIG WORRY

The big worry now is that the collapse in oil prices -- from more than $100 a barrel a little over a year ago to less than $50 today -- reflects deteriorating growth in China and the rest of the world. That may weigh on inflation in the U.S. and stymie efforts by the Fed to boost rates, especially as developing countries respond by weakening their currencies against the dollar to restore demand.

“The market realizes that if the Fed is really going to go on a tear, the system is going to break and stop them,” said Robert Tipp, the chief investment strategist at Prudential Financial’s fixed-income unit, which oversees $560 billion.

Traders in the futures market are already pricing in just two rate increases in the coming year, half of what economists forecast.

DIFFERING VIEWS

The turbulence unsettling financial markets worldwide has already become a source of debate for policy makers.

At the Kansas City Fed’s annual conference in Jackson Hole, Wyoming, St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester said that they consider the U.S. economy to be strong enough to raise interest rates.

Fed Vice Chairman Stanley Fischer said “it’s early to tell” whether recent market swings would change the likelihood of a rate increase next month, while New York Fed President William Dudley said on Aug. 26 that the turmoil made a September increase “less compelling.”

Those shocks have already swayed strategists at J.P. Morgan, even as the bank’s economists stick to their forecast for rates to rise next month.

On Friday, the fixed-income strategy team cut its year-end estimate for the effective fed funds rate to 0.4 %, indicating one increase by the central bank, from 0.6 %, which suggested two.

“It’s a global story,” said Jay Barry, a U.S. fixed-income strategist at J.P. Morgan.

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