Business economists see Fed rate hike in 6 months

WASHINGTON, March 8 (BestGrowthStock) – Most U.S. business
economists expect the Federal Reserve to raise benchmark
interest rates within six months by between a quarter and a
half percentage point, according to a survey released on
Monday.

A majority of economists in the National Association of
Business Economists’ semiannual survey found the Fed’s current
stance of rates near zero percent is appropriate. A growing
number, however, believe the U.S. central bank’s policy’s are
too stimulative, according to a poll of 203 members taken Feb.
4-22.

“A majority believes that a rise in interest rates is both
likely and appropriate in the next several months,” said NABE
President Lynn Reaser.

The Fed has said continued high rates of unemployment and
low inflation warrant holding rates exceptionally low for an
extended period. Still, reports show the economy is recovering
gradually, and some policy makers believe the Fed should begin
to prepare markets for the beginning of the process of
tightening financial conditions.

Economists polled in the NABE survey agreed that the end of
the Fed’s purchases of mortgage-backed securities would raise
mortgage interest rates, with 42 percent seeing a bump of
between a quarter of a percentage point and a half percentage
point.

The Fed is on track to end a program of buying $1.25
trillion in mortgage-backed securities at the end of this
month. The program was launched to provide extra support for
the economy after policy-makers chopped rates to near zero.

A large share — 44 percent — thought inadequate
regulatory oversight was the primary contributor to the deep
financial crisis that plunged the economy into a painful
recession.

Most of the economists thought trimming the Fed’s
regulatory powers, as some lawmakers have proposed, would make
it less effective in conducting monetary policy.

A rising share of the economists thought current fiscal
policy is about right — at 44 percent, the highest percentage
since 2007. However, a large majority said another fiscal
stimulus package is not needed.

President Barack Obama signed a $787 billion stimulus
package in February 2009. U.S. congressional Democratic Party
leaders plan to advance a series of smaller job-creation bills
to avoid public sticker shock and keep their job-creation
efforts in the news.

Almost 80 percent of the economists polled said the

country’s long-term budget deficit could hurt U.S. ability to borrow.

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(Reporting by Mark Felsenthal; Editing by Leslie Adler)

Business economists see Fed rate hike in 6 months