The effects of the Federal Reserve's bond-buying program are looking more lackluster and more disruptive to market functioning, according to the latest CNBC Fed survey.
The net percent of respondents who believe quantitative easing, or "QE," can help lower mortgage rates and bond yields has fallen, as has the net percent who say it will raise stock prices.
The strategists, economists and fund managers who responded to the survey also expect the Fed to begin to "taper," or pare back its $85 billion a month in asset purchases sooner than they did when asked the same question in April. The majority now see the Fed starting to reduce its bond buying this December, compared to February, as expected in the April survey.
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While QE was not seen by most as a positive for unemployment, the amount who saw it as helpful actually increased to 36 percent from 28 percent in April.
The Fed begins its two-day meeting Tuesday, and it will release its policy statement and updated economic forecast Wednesday afternoon. Fed Chairman Ben Bernanke holds a press briefing after the meeting, and market expectations are that he will provide some clarity on how and when the Fed could pull back from its quantitative easing program.
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The survey also shows that the Fed is expected to buy fewer bonds than were expected in April, with the average amount of QE this year $880 billion, down from $936 billion. That indicates the market is pricing in one month less in the way of QE, but spreading it out over the year. They also see an average $367 billion in purchases in 2014, and mostly all of the 60 participants expect the program to end in 2014.
Fifty-eight percent of the respondents see the Fed ending the program within 12 months, by June 2014. Five percent expect the Fed to stop the program entirely this year, while about 12 percent see it ending in 2015 or later.
"Low inflation and sluggish growth makes it necessary for the Fed to start tapering later than sooner," said Joel Naroff, president of Naroff Economic Advisors, in answer to the survey.
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Expectations for the effectiveness of QE in keeping interest rates low are also changing. The percent of respondents who see QE lowering mortgage rates dropped to 42 percent, from 46 percent in April. This is against a backdrop of rising rates, where 30-year mortgage rates have risen above four percent for the first time in a year.
The number who see the Fed's QE helping keep bond yields low also dropped—to 46 percent from 54 percent in April. But an almost equal amount, 44 percent, don't believe the monthly purchases of mortgage and Treasury securities are helping drive down bond yields. Since early May, 10-year Treasury yields have risen in volatile trading from a low of 1.62 percent on May 2 to as high as 2.3 percent. On Monday, the 10-year was yielding 2.17 percent.
As for the stock market, 70 percent said that QE could help drive stock prices higher, down from 83 percent in April. But their year-end target on the S&P 500 increased from an average 1612 for Dec. 31, to 1655. They also forecast an average 1722 by June 30, 2014. The S&P 500 closed Monday at 1639. As rates have risen since early May, the S&P 500 is up 3.6 percent, but it has seen its most volatile trading of the year.
"The Fed will likely look to the next meeting to attempt to 'calm' markets," wrote Kevin Giddis, who heads fixed income at Raymond James, in response on the survey.
David Kotok of Cumberland Advisors wrote that the Fed's communication policy has "been fuzzy and caused an added volatility."
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—By CNBC's Patti Domm. CNBC Senior Economic Correspondent Steve Liesman created the survey and reports on it ahead of Fed meetings.