The survey, which includes responses from 67 economists and equity and fixed income managers, shows disagreements with the Fed beyond just the date of the first rate hike.
More than half of respondents think Fed policy is “too accommodative,” a sizable jump from the January survey when just 37 percent thought the U.S. central bank’s policy was too easy.
A third of market participants say the Fed’s characterization of the economy in its policy statements is “too pessimistic,” with 63 percent saying it’s just right.
“The Fed's current monetary policy is unsustainable beyond the U.S. election, and risks undermining its credibility,” wrote David Goerz of Highmark Capital.
The percentage of respondents looking for additional quantitative easing in the next 12 months fell back to 33 percent, the lowest level since July. About two-thirds of respondents see no additional QE.
Asked what other actions the Federal Reserve could take to drive down long-term yields, 43 percent said “none,” while 39 percent expect the Fed to purchase additional securities while sterilizing those purchases with asset sales of some kind or repo operations.
“The Fed is being cautious given all the risks out there, but once European default issues and gasoline price hike concerns are moderated, the Fed will have to consider lightening up their pessimistic view,” wrote economist Joel Naroff.
Highlighting the shifting sentiment, John Augustine, Fifth Third Asset Management, said, “The Fed needs to start formulating an exit plan.”
The changed sentiment comes with a somewhat more upbeat mood on the economy. The probability of recession in the next year has fallen to 19.1 percent, down from 36 percent in September and 20.3 percent in January.
But the group does not see especially strong growth. Gross domestic product in 2012 is seen growing 2.46 percent year over year, up just a tenth from the January survey. A bit more optimism crept into the 2013 outlook with GDP forecasts averaging 2.74 percent compared with 2.59 percent in January.
“Recent data are decidedly constructive, and there is now a chance that the recovery in employment will become a transformative event, leading to a self-perpetuating recovery,” wrote David Resler of Nomura Securities.