–29% Expect No Change in Interest Rates Over Next Year

By Steven K. Beckner

(MNI) – The Federal Reserve has monetary policy “about right”
currently, but should tighten it over the next 12 months, according to a
majority of members of the National Association for Business Economics
in a survey released Monday.

The NABE survey of 263 economists also showed support for the Fed’s
large-scale asset purchase program and for it continuing to make
monetary policy under a “dual mandate” of maximum employment growth and
price stability.

“More than half (52.4%) of the respondents felt that current
monetary policy is about right, while 40.9% felt it was too
stimulative,” said the NABE. “The remaining 6.7% indicated that current
policy is too restrictive.”

The NABE said more than two-thirds (67.7%) of survey participants
“would like to see monetary policy over the next 12 months become more
restrictive, while only 6.8% would prefer a more stimulative policy.”

The other 25.5% wanted monetary policy to remain unchanged.

As for what they expect the Fed to actually do, the survey found
that 71% of its member economists look for the Fed “to raise interest
rates over the next 12 months.”

But 29% expect no change in interest rates over the next 12 months.

The NABE said 30% expect the Fed to raise interest rates by 26-50
basis points, while 17% believe that monetary policymakers will boost
rates by 25 basis points or less.

The NABE said 62.4% thought that the Fed’s $600 billion asset
purchase program is having a “positive” impact, and 59% thought
so-called QE2 should continue through its planned conclusion at the end
of June. Only 6.5% thought that quantitative easing should be extended
beyond mid-year.

A sizable minority of 41% said QE2 should be terminated
immediately or before the end of the second quarter.

In other aspects of the survey, which was conducted through Feb.
14, a large majority of economists see the need for restraints
on deficit spending.

More than 93% favored lowering the corporate tax rate.

Seven out of 10 think Fannie Mae and Freddie Mac should be
privatized.

** Market News International **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$,M$$BR$]