Economists are wary of Jerome Powell’s latest fiscal policy moves.
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Economists are the most critical of the Fed’s tight policy they’ve been in 13 years, an NABE survey shows.
21% of economists polled think the Fed’s policy is “too restrictive” — up from 14% in March and August last year, and the most since 2011.
That scrutiny comes as the Fed recently signaled that rate cuts are unlikely in March.
The Fed’s tight monetary policy has had its fair share of skeptics. Now, more economists are beginning to wonder if Jerome Powell is on the right track.
According to the National Association for Business Economics’ economic policy outlook, 21% of the economists polled think the Fed’s monetary policy is “too restrictive” — up from 14% in both the March and August surveys last year, and the highest reading since 2011.
The number of economists who think the central bank’s policy is “about right” also slipped lower in the recent release, dropping from 74% last August to 70% today.
The survey results, collected between Jan. 23-30, arrived just before Fed chair Jerome Powell signaled a March cut is likely off the table, further pushing out the outlook on the first rate cut. Traders are now wagering that the Fed will bring rates down by 125 basis points by the end of the year — which is a more aggressive policy loosening than officials have suggested.
“Tightening” monetary policy is when the Fed makes borrowing money more expensive, which has a cooling effect on the economy. Last year, the Fed raised the benchmark interest rate from nearly zero to over 5% in what’s been the most aggressive rate-hike cycle since the 1980s.
Still, the health of the US economy has been strong — as illustrated by blowout jobs reports, strong GDP data, and hot consumer spending. That has extended the Fed’s pause on rate hikes, fueling wild speculation in the markets about when the first rate cut will arrive.