NEW YORK (TheStreet) -- The Federal Reserve will most likely hike short-term interest rates in September, said Moody's Analytics chief economist Mark Zandi.

"At that point in time it will be clear that the economy, given all the job growth, will be closing in on full-employment quickly and that wage growth will be accelerating," he said. "It will also be clear at that point that inflation has bottomed out and we'll start to see some pickup, so all the ingredients are in place I think by September for the first rate hike."

In her Congressional testimony last week, Federal Reserve Chair Janet Yellen said the Committee won't raise rates until it is "confident" that inflation moves back towards its 2% target.

On Monday, the central bank's preferred inflation gauge, the personal consumption expenditure price index, rose 1.3% year-over-year as of January, the Bureau of Economic Analysis said.

Last Friday, the consumer price index for January fell 0.1% over the past year, with core CPI rising 1.6%, the Bureau of Labor Statistics revealed.

Deflation in the headline numbers doesn't worry Zandi.

"The Fed clearly isn't focused on that and is focused on the core inflation rate," he said. "If we look forward a year or two and that's what the Fed is doing, they'll see a full-employment economy and inflation moving closer to target and at that point, they'll conclude that zero interest rates is not appropriate at this time, we need to raise rates."

Against the back drop of the Fed's rate hike is the precipitous and long-lasting decline in oil prices, which bodes well for consumers. But they haven't been spending the savings at the pump, which Zandi says will amount to $120 billion over the next year.

"It takes time," he said. "You need to see the savings from low gas prices build up in your checking account over a period of time, so it will take three to six months for consumers to feel comfortable enough to spend, but it's coming."

He says if prices average $63 per barrel in 2015, gross domestic product, the broadest measure of economic activity, will add a half a percentage point.