Monetary Policy Right for Now, but Eventual Tightening Needed

Nearly 70 percent of business economists believe that monetary policy is “about right,” up from 63 percent inMarch and 56 percent a year earlier. Another 25 percent view the Federal Reserve’s current policy stance as too stimulative, up slightly from March. Respondents are split on whether policy should remain on hold (49 percent) or become more restrictive (45 percent) over the next six months.

When asked their expectation of the Fed’s interest rate policy over the next six months, 56 percent expect ratesto remain where they are while 44 percent expect an increase. For those expecting a rate increase, some 40 percent expect a rate increase of 25 basis points.

Percent of NABE Panelists Who Consider Current Policy to be “About Right”

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Note: All data are as percent of total responses. Prior period data have been revised to this basis.

Half of the economists do not believe the quantitative easing actions of the Fed will be inflationary over the next couple
of years while 41 percent think they will. The top reasons cited for concern were “lagged effects of policies now
in effect,” “monetization of the debt,” and “ineffective 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. This may reflect their view that an excessively stimulative
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. However, only a small percentage feels its policies would be inflationary
due to a loss of Fed independence.

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