Majority Sees Fed Winding Down Stimulus: CNBC Survey
CNBC Senior Economics Reporter
Ben Bernanke and the Federal Reserve will likely end their efforts to stimulate the economy in June, according to the majority of respondents to the latest CNBC Fed Survey.
But a sizable minority of 30 percent think the central bank is not ready to put its check book away just yet.
The survey was taken Thursday through Monday, with the vast majority of responses coming after news of the Japanese earthquake and tsunami, but before the most recent reports of a potentially serious series of radiation leaks.
By June of this year, 81 percent of the 70 economists and Wall Street strategists and fund managers who responded to the survey, think the Federal Reserve will purchase exactly the $600 billion of treasuries it set out to buy in its QE2 program. About 16 percent believe the Fed will do less and just under 3 percent look for the Fed to purchase more by June.
Asked about possible Fed purchases after June, 70 percent said they don’t expect them, while 30 percent do. The group who see the Fed plowing ahead with additional QE forecast an average of about $150 billion of additional treasury buys by December.
Participants are divided on the issue of whether the Fed has policy right. Half of the respondents think the Fed has policy right, while 44 percent believe it’s too accommodative.
CNBC also asked extensive questions about what would happen to jobs, stocks, inflation and growth when QE2 ends. Roughly 70 percent believe that interest rates will be higher, with about a quarter saying they will stay the same.
About a third of respondents believe the end of QE2 will bring with it lower stock prices, but slightly more than half say there will be no impact on equity values.
On the key question of job growth, 70 percent see no change because of the end of quantitative easing, and 16 percent percent see job growth improving. Another 15 percent see lower job growth.
Oil prices, which have held back stock gains recently, are expected to stay about the same when QE ends, according to 68 percent of the respondents. Another 13 percent see crude prices rising, and 19 percent see them moving lower.
Survey respondents were more upbeat in this survey on the effects of QE2 than they were in December. This time, 54 percent said QE2 was effective at lowering rates, compared with 44 percent who said it was not.
Back in December, 33 percent said QE2 had been effective at keeping rates low and 63 percent said it was ineffective.
The same was true for the effect of QE2 on stock prices. In December 74 percent said the program had been effective at raising stock prices compared with 86 percent in the most recent survey.
On the issue of when the Fed will start to tighten, 57 percent say the central bank will begin raising rates in either the first or second quarter of 2012. But only 34 percent see the Fed selling assets by then. In contrast, 37 percent see the Fed selling assets some time after 2012.
And in a question CNBC will track over time, we asked respondents for their view of the sustainable unemployment rate, or the rate that the economy can support without sparking inflation.
They put that number on average at just over 6 percent, as much as one percentage higher than what was commonly believed before the recession.