Markets Doubt More Fed Easing Will Boost Hiring: Survey
CNBC Senior Economics Reporter
Markets overwhelmingly are looking for the Federal Reserve to announce a new program of asset purchases as soon as Thursday to try and boost the US economy, according to the latest CNBC Fed Survey.
But Wall Street is expressing considerable skepticism that the Fed's actions will do much good to bring down the unemployment rate.
On the other side of the Atlantic, however, actions by European Central Bank President Mario Draghi have eased at least somewhat the European financial crisis.
The survey found a larger (though still small) percentage of respondents who believe the euro zone will remain intact over the next five years. And investors see a reduced probability of bond defaults by troubled countries compared with the prior survey. (Read More: Bank Chiefs Bank Draghi's Bond-Buying Plan.)
A full 90 percent of the 58 money managers, strategists and economists who responded to the September survey think the Fed will announced a new program of quantitative easing in the next 12 months.
(Read More: What Wall Street Is Saying About Fed and Economy.)
Of those who think QE is coming, 77 percent believe it will be launched at the current meeting, which ends Thursday, and 86 percent think the Fed will purchase a mix of Treasurys and mortgage-backed securities.
"If many FOMC members meant what they said about needing to see 'substantial and sustainable strengthening in the pace of the economic recovery' in order not to implement a third round of quantitative easing, then it is time for them to act," Mike Dueker of Russell Investments wrote in response to the survey.
Such a high level of conviction among market participants for Fed action raises the stakes for the central bank. It risks a market sell-off in equities if it fails to provide the expected stimulus.
Despite expectations for QE, investors are fairly pessimistic that it will help the job market. Chris Rupkey at Bank of Tokyo-Mitsubishi, notes that the stock market is rallying "on hopes for QE3 even as investors believe QE3 will have virtually no effect. The market does not seem to know what it wants, but the Fed is going to give it to them anyway."
Just 36 percent of respondents think QE will help lower the unemployment rate with 60 percent saying it won't.
"The Fed signaled a likely September policy move in the prior minutes, and the last employment report should seal the deal around QE rather than a communication change," wrote Mike Englund of Action Economics in response to the survey. "Nevertheless, there is likely little economic benefit from further QE action despite the defense made by Chairman Bernanke at Jackson Hole. The Fed is simply trying to look like part of the solution rather than part of the problem." (Read More: The Fed at Jackson Hole.)