NABE Survey: Economists' Confidence in Fed Policy Slips

Tuesday, 26 Aug 2014 10:25 AM

By Dan Weil

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Federal Reserve policy earns less approval from economists now than it did six months and a year ago, according to a new survey of 257 members of the National Association for Business Economics (NABE).

Overall, 53 percent of the respondents, polled between July 22 and Aug. 4, believe monetary policy is on the right track, down from 57 percent in February 2014 and August 2013, while 39 percent think Fed policy is too stimulative.

The central bank has kept its federal funds rate target at a record low of zero to 0.25 percent since December 2008. It has expanded its balance sheet to $4.4 trillion through quantitative easing.

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A total of 41 percent of respondents think the Fed will raise its fed funds target in the first half of 2015, and 34 percent see it happening in the second half of 2015. But 31 percent would like to see an increase by the end of this year.

As for quantitative easing, 68 percent of those polled consider it a success, close to February's reading.

"Most panelists do not see inflation being a major concern in the coming years. The majority of NABE panelists believe that inflation will be at or near 2 percent in five years," said Peter Evans, NABE Policy Survey committee chair and vice president at the Center for Global Enterprise.

While many conservatives offer heavy criticism of the Fed, John Cochrane, a finance professor at the University of Chicago, doesn't.

"As Fed officials lay the groundwork for raising interest rates, they are doing a few things right," he writes in The Wall Street Journal.

"The Fed's plan to maintain a large balance sheet and pay interest on bank reserves, begun under former Chairman Ben Bernanke and continued under current Chair Janet Yellen, is highly desirable for a number of reasons — the most important of which is financial stability," Cochrane says.

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