Economists in survey increasingly wary of Fed’s stimulus policy


WASHINGTON, D.C. — Even as top Federal Reserve officials continue to defend their economic stimulus, a growing number of industry and academic economists view the Fed’s policy now as too aggressive — with two-thirds of those recently surveyed saying the central bank should terminate its controversial bond-buying program this year.

The survey, of 196 members of the National Association for Business Economics, found that a slim majority of them consider the central bank’s monetary policy as “about right.” But 44 percent of them said the Fed’s policy was “too stimulative.” That is up from just 26 percent who gave that response in September.

The marked shift in attitude reflects the increasing concerns inside the Fed as well, in the wake of the central bank’s decision in December to keep buying a total of $85 billion in Treasury and mortgage-backed securities monthly in a bid to lower long-term interest rates to boost spending and investment.

The survey was released Monday as the association held its annual economic conference, at which Fed Vice Chairman Janet Yellen laid out a case for the central bank’s expansive monetary policy.

Yellen, in an address to the group meeting in Washington, D.C., said the policy was justified given the nation’s still-troubled labor market, with high unemployment and underemployment, and the outlook for continued subdued inflation.

She said she did not see indications that the Fed’s massive bond purchases had impaired the operations of financial markets. Nor was there “persuasive evidence” that the Fed’s easy-money policies had led to excessive risk-taking that was creating asset bubbles, she said, echoing remarks that Fed Chairman Ben S. Bernanke made last week in congressional testimony.

“At present, I view the balance of risks as still calling for a highly accommodative monetary policy to support a stronger recovery and more rapid growth in employment,” Yellen, considered a leading candidate to succeed Bernanke as chairman, said in her prepared remarks.

Many in the audience listening to her speech would agree that the Fed’s bond purchases have been effective in stimulating the economy; in fact, about two-thirds of the association’s members surveyed said so. Still, a similar two-thirds wanted the Fed to end the bond purchases some time in 2013, which would be earlier than what many investors see as the termination date.

Fed policymakers have not said explicitly when they would stop the asset purchases, which many economists also fear will spark runaway inflation down the road. What the Fed committee has pledged is that it will continue the bond buying until there has been a “substantial improvement” in the outlook for the job market.

On the appropriateness of current fiscal policy, there was little consensus from the economists surveyed. About one-third each said it was “too restrictive,” “about right” and “too stimulative.”

More than 70 percent of the economists, however, said they opposed the implementation of all of the automatic budget cuts under sequestration, which took effect Friday. And almost everyone polled agreed that Congress should enact policies to bring about further deficit reduction in the coming 10 years.