WASHINGTON, D.C.: US economists are growing worried about the Federal Reserve’s tightening policy, saying it is dampening economic growth, a key survey showed on Monday (Tuesday in Manila).
The National Association for Business Economics (NABE) said its semiannual survey of members found a large majority of business economists expect the Fed to continue raising the benchmark federal funds rate in 2016, following December’s hike from near zero.
But economists have lowered their estimate of the number of hikes this year to two or less, down from the four seen in the August survey, reflecting the cooling economy, NABE said.
“Tight fiscal policy is increasingly cited as a significant restriction on current economic growth,” said Lisa Emsbo-Mattingly, NABE president and director of research at Fidelity Investments, in a statement.
“A narrow plurality of panelists—41 percent—now characterizes current fiscal policy as ‘too restrictive’ compared to the 29 percent who held this view last August,” she said.
Meanwhile, 38 percent judge fiscal policy as ‘about right,’ down from 41 percent. But almost 31 percent say policy is “too stimulative.”
Even so, about three-quarters of the 252 economists surveyed expect the fed funds rate, now at 0.25-0.50 percent, to be raised at most two times this year, which would keep the range at 0.75-1.0 percent or less by year-end.
The majority of economists supported the Fed’s view that inflation, would be near the Fed’s 2.0 percent target in five years.
Weighing in to a hot topic in the US presidential race, the NABE economists showed wide support for welcoming highly skilled immigrants. A large majority—79 percent—said the federal government should remove restrictions for this group.
The Bank of Japan’s decision in January to use negative interest rates to avoid deflation and boost Japanese economic activity drew a lukewarm response: 53 percent of respondents believed the BoJ action would not significantly impact growth, and only a third expected some positive impact.