Top economic forecasters worry that with the economy expanding again, the Federal Reserve will wait too long to tighten its loose monetary policy, according to a survey released Monday.
The 48 professional forecasters polled by the National Association for Business Economics for its first macroeconomic survey of the year expect “the economic recovery to remain firmly on track.”
“We see a healthy expansion under way, although it will take time to reduce economic slack and repair damaged balance sheets,” said NABE president Lynn Reaser, chief economist at Point Loma Nazarene University.
Though forecasters anticipate consumer spending will “remain relatively sluggish,” they project gross domestic product will grow a real 3.1% this year and next, helped by a continued easing of financial strains.
Business spending is expected to play “a vital role” along with a rebound in housing.
The NABE panel also expects an average monthly increase of 103,000 jobs, but predicts the unemployment rate will still be no lower than 9.6% by the fourth quarter.
The forecasters believe “inflation will remain subdued,” with core consumer prices rising just 1½% this year and 1.7% next year.
Nonetheless, nearly two thirds of them expressed concern that the Fed will raise interest rates “too slowly” rather than “too quickly.”
“NABE panelists are concerned that the Fed will be slow to remove the 'punch bowl,’ ” according to the survey. “They rank the risk of 'inflation’ to be substantially greater than 'deflation’ over the next five years despite a considerable degree of economic slack.”
“Also, when asked specifically to assess the risk of the Fed moving 'too slowly’ or 'too quickly’ to remove monetary stimulus, respondents tilted 60%-40% in the direction of 'too slowly,’” the NABE said in summarizing the survey findings.
— Market News International
