WASHINGTON (MaceNews) – The semiannual National Association for Business Economics issues survey, released Monday as the group’s virtual national policy conference got under way: generally endorsed current monetary and fiscal policy with only a slight increase among those who found Fed policy too stimulative.
The following are survey highlights:
Summary
“Although nearly half of NABE Policy Survey panelists expects the Federal Reserve to raise its short-term interest rate target in 2022, nearly as many expect the Fed to keep its current target until 2023 or later,” said NABE President Manuel Balmaseda, CBE, chief economist, CEMEX. “About two-thirds of survey respondents believe greater fiscal and monetary policy coordination is desirable, and a majority of panelists believes that inflation risks are higher than in the past two decades. More than 70% believe the current stance of monetary policy to be ‘about right,’ but one in four respondents views current Fed policy as ‘too stimulative.’”
“Seventy percent of respondents believe that economic policy should do more to mitigate climate change, while 55% believe that the federal government should enact a broad-based energy or carbon tax to boost government revenue,” added Survey Chair Ilan Kolet, Institutional Portfolio Manager, Fidelity Investments. “Almost two-thirds of respondents indicate the current fiscal deficit should be addressed by enacting structural policies to stimulate stronger economic growth, while more than one-third also favor exercising greater spending restraint or increasing tax revenue.
Monetary Policy
About three-quarters of panelists (72%) believe that the current stance of U.S. monetary policy is “about right.” This share is nearly as large as in the August 2020 survey results, which had the strongest approval message in over 13 years, since the 81% share recorded in March 2007. One in four respondents (26%) views current Fed policy as “too stimulative,” compared to the 20% who held this view in the August survey, while 2% indicate it is “too restrictive.” The Federal Reserve has been targeting a range of 0.0%-0.25% for the fed funds rate since March 15, 2020.
A large majority of survey respondents (88%) expects the next move in the fed funds target rate will be a rate hike, while 3% anticipate the next move will be a rate cut—implying the Fed would aim for a negative fed funds rate.Most panelists (72%) expect the upper end of the fed funds target rate range to remain at 0.25%, or even drop lower, through year-end 2021. Only 3% of respondents expect the top of the Fed’s target band to be at 0.75% or higher by year-end 2021, while 47% of panelists expect a target level of 0.75% or higher by the end of 2022. Nearly a third of survey respondents (30%) looks for an upper target of 0.25% or less to persist through 2022.
Fiscal Policy
Forty-one percent of survey respondents find current fiscal policy is “about right,” up modestly from the 37% who held this view in the August 2020 survey. Thirty-four percent of respondents indicate that current policy is too stimulative, up from 17% last August. Only 25% of respondents believe that current policy is too restrictive, down from 45% in the previous survey. More than a third (38%) of panelists believe that the primary objective of current fiscal policy should be to stimulate more robust economic growth in the medium-to-long term, while another 31% believe the primary goal should be to stimulate growth as quickly as possible. Smaller shares suggest that current fiscal policy should focus primarily on addressing income inequality (8%) and reducing the deficit and debt (7%).
Regarding what steps should be taken to address the current fiscal deficit, 64% of respondents are in favor of enacting structural policies to support stronger economic growth, while more than one-third each favors increasing tax revenues (38%) and exercising greater spending restraint (37%). Sixteen percent believe some other step(s) should be taken, while 8% believe no policy changes should be made. (Note: panelists were able to select more than one response.) The panel remains split in its evaluation of Congress’ fiscal response to the coronavirus recession.
Thirty-seven percent rate the response as insufficient, slightly lower than the 40% in the August 2020 survey. Thirty-three percent rate the response as adequate, also down slightly from 37% in the previous survey. Eighteen percent of panelists currently believe that the fiscal response is excessive, up from 11% in the August survey. (The survey was conducted while the American Rescue Plan Act was under consideration in Congress, and all responses were submitted before it was signed into law.) Most respondents are concerned about the trajectory of public debt. Only 12% of respondents are not concerned. 37% are mildly concerned, 26% are concerned, and 25% are very concerned.
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