News

Survey: Economists split on Fed's policy stance

The bulk of business economists expect the Federal Reserve will raise interest rates this year but their views on the Fed’s policy stance are divided.

The survey by the National Association of Business Economics found that 75 per cent of respondents expect the Federal Open Market Committee will raise its target for the federal funds rate above the current level by year-end 2016. That view is roughly on par with when the last survey was conducted in August. Approximately 39 per cent expect two rate increases in 2016 and 17 per cent expect three or more.

The Fed raised its benchmark interest rate from record lows in December and signalled the possibility of four more hikes in 2016. But roiling financial markets and indications of global weakness have cast doubt on the outlook for more rate increases.

When asked about their take on the appropriateness of the current fiscal policy, there was more change in opinion since the last survey. More economists felt it is too restrictive — jumping from 29 per cent in August to 41 per cent. The percentage that felt it was about right fell from 46 per cent to 38 per cent.

The survey summarizes the responses of 252 members of the National Association for Business Economics.