A clear majority of business economists anticipate that the Federal Reserve will keep the federal funds rate near zero over the next six months, according to an August survey released yesterday by the National Association for Business Economics.
Among 266 NABE members surveyed, an even larger majority called monetary policy "about right." They were divided on whether or not the Fed's quantitative easing policies will be inflationary.
In the arena of fiscal policy, only about one-third thought it was "about right." Three-quarters thought fiscal policy needs to become more restrictive, but only 28% think it actually will be.
There was also division on health care, energy, and financial reform proposals.
"This is almost certainly one of the fastest-moving and most controversial economic policy environments we have experienced in a generation," said NABE president Chris Varvares, president of Macroeconomic Advisers LLC. "That said, NABE members express an impressive degree of confidence in monetary policy and impending financial reforms."
"The more vexing policy challenges about which there is less agreement are federal health care, cap-and-trade, and budget policies, which are by no means independent of each other," Varvares added.
NABE reported that, for now, nearly 70% of its members believe monetary policy is "about right," up from 63% in March and 56% a year earlier. The proportion of those regarding the Fed's current policy stance as too stimulative rose to 25%.
Economists participating in the survey were divided on whether policy should remain on hold (49%) or become more restrictive (45%) over the next six months.
When asked their expectation for the funds rate over the next six months, 56% said they expect it to stay where it is, while 44% predicted an increase. Among those expecting a rate increase, some 40% expected a hike of 25 basis points.