ECONOMISTS FAVOR INCREASED FEDERAL SPENDING

Survey shows 41% deem government’s fiscal policy ‘about right’

A majority of business economists think the recovering economy will benefit from much more government spending despite concerns in financial markets that the $1.9 trillion COVID-19 relief measure Congress recently enacted could ignite inflation.

That’s the view that emerged from a survey released Monday by the National Association for

Business Economics of 205 forecasters. The economists were polled while the new relief measure was under consideration in Congress but before it was signed into law.

The relief package is distributing $1,400 checks to most adults, renewing federal aid for the unemployed, and supplying another round of help to small businesses, among other things.

But some economists and many Republicans have expressed concern that the size of the package could accelerate inflation and potentially force the Federal Reserve to raise interest rates prematurely.

Yet among the business economists surveyed by the NABE, 41 percent describe the government’s current fiscal policy, including such spending, as “about right,” and an additional 25 percent call it too restrictive. Only 34 percent characterize the current fiscal policy as too stimulative for the economy.

Last week, the Fed issued forecasts from its policymakers that showed they expect to keep their benchmark short-term rate near zero through 2023. But the NABE survey found that the vast majority of the respondents believe the Fed’s first rate hike will come earlier, with nearly three in five predicting that the central bank will start raising rates before the end of 2022.

The survey found that 12 percent of respondents think the Fed will even start hiking rates this year; 46 percent believe it will start in 2022. An additional 28 percent of the economists said they think the first Fed rate increases will occur before the end of 2023.

Only 12 percent of the NABE economists who responded to the survey felt the Fed would stick with its forecast that it will keep its key rate near zero through at least 2023 to provide continued support to the economy.