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Survey: Economists expect Fed to continue to raise interest rates in 2016

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Survey:  Economists expect Fed to continue to raise interest rates in 2016

A growing number see tight fiscal policy as restraining economic growth.

According to a survey of business economists released today by the National Association for Business Economists, expectations for continued increases in interest rates by the Federal Reserve remain steady.

“A large and growing majority of business economists expects the Federal Open Market Committee to continue raising the near-term target for the federal funds rate throughout 2016,” said NABE President Lisa Emsbo-Mattingly, director of research, Global Asset Allocation, Fidelity Investments. “However, respondents on balance expect fewer increases in 2016 than they had predicted in the August 2015 survey.

“Tight fiscal policy is increasingly cited as a significant restriction on current economic growth.”

“While slightly more than half of survey respondents believe that the current monetary policy stance of the Fed is ‘about right,’ nearly 31% indicate that current policy is too stimulative,” Emsbo-Mattingly continued. “Approximately 75% of respondents expect the Fed funds rate target to be raised two times or less throughout the course of 2016, with two-thirds of respondents seeing the rate peaking at 3% or lower before the Fed begins easing again.”

On the fiscal side, economists are increasingly in favor of more stimulus – albeit by a narrow margin.

“Tight fiscal policy is increasingly cited as a significant restriction on current economic growth,” said Emsbo-Mattingly. “With economic growth having slowed since the last survey was released in August 2015, a narrow plurality of panelists—41%—now characterizes current fiscal policy as ‘too restrictive’ compared to the 29% who held this view last August, whereas 38% of respondents now characterize fiscal policy as ‘about right,’ down from 41%in August.

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