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CNBC Survey: Few Economists See Recession Ahead

Steve Liesman
Monday, 6 Aug 2007 | 12:27 PM ET

Despite brewing financial turmoil, economists see only a one-in-four chance of recession and say the Federal Reserve will leave rates unchanged at Tuesday's meeting of the Open Market Committee.

The FOMC is the body within the Fed made up of presidents and governors that sets interest rate policy.

But the 47 economists CNBC polled suggest that the Fed may eventually be forced to come to the market's rescue.

CNBC asked if the Fed should take action to calm financial markets. Some 36% said no, but 57% said "not yet," suggesting that rate cuts could be coming if things get worse from here.

That's backed up in their outlook for the Fed. Some 56% say the benchmark federal funds rate will be unchanged six months from now, but 34% see the Fed lowering the rate by 25 basis points or more.

The weighted average for the funds rate is around 5% six months from now. The reason is that economists still don't see much chance of a recession.

Fed Chairman Ben Bernanke is on the cusp of what is likely his biggest test. So far, a slight majority of economists gives him an A. A third give him a B.

But it's like giving a grade before the final exam, or even the mid-term. His ultimate grade may well depend on how he handles the current mess.

You can take the survey yourself at cnbc.com. On Tuesday at 6:30 am on "Squawk Box," CNBC will compare how people on Main Street compare in their outlooks with Wall Street economists.

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