RTTNews - The National Association for Business Economics revealed Monday that economists strongly agree with current monetary policy and have a favorable view of the current stance of fiscal policy.
In a survey conducted by the NABE, nearly 70 percent of business economists said that monetary policy was about right. That number is up from 63 percent in a March survey and well above 56 percent from a survey taken one year earlier.
Another 25 percent view the Federal Reserve's current policy stance as too stimulative, up slightly from March, the NABE added.
Respondents were split--49 to 45 percent--on whether policy should remain as it is or if it should become more restrictive.
With regard to interest rates, 56 percent said they expected rates to remain near zero for the next six months, while 44 percent said they expected an increase.
On the question of inflation, 41 percent of respondents also said that they believe the Fed's monetary policy will prove inflationary in the future, citing concerns over monetization of the debt and the Fed's exit strategy.
Economists believe the long-term core inflation target of the Fed is two percent, but think that the average of core inflation in the 2014-18 time period will be three percent, the NABE said.
This may reflect their view that an excessively simulative fiscal policy and a complicated exit from its quantitative easing policies over the medium term will result in the Fed tolerating a higher level of inflation than it desires, the group added. However, only a small percentage feels its policies would be inflationary due to a loss of Fed independence.
The Fed has been generally tight lipped about its exit strategy from the monetary policy it enacted during the financial crisis, merely saying that it had the tools to unwind its balance sheet and tighten it when it becomes necessary.
The NABE also reported that 76 percent of economists don't feel that a second stimulus package will be needed, and 75 percent said they hoped fiscal policy would become more restrictive during the next two years.
However, only 28 percent of those polled said that they thought fiscal policy would become more restrictive. 42 percent expect it to become more simulative.
Thirty-five percent of respondents said that fiscal policy was about right, although that number is up from 22 percent reported in March. Broken down, 50 percent said it was too simulative, while 11 percent said it was too restrictive.
The Obama Administration's $787 billion stimulus package and the bailout of large banks has raised concern among lawmakers and economists in light of a $1.58 trillion budget deficit in 2009 and a $9 trillion deficit projected for 2010-2019.
The NABE polled 266 of its members for the survey, which was conducted from August 3 through August 18.
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