Most business economists expect the Federal Reserve to raise interest rates in the second half of this year, but say uncertainty over the Fed's plans is no longer slowing U.S. economic recovery, according to a new survey.
Seventy-one percent of the 293 economists polled by the National Association of Business Economists said they expect the Federal Open Market Committee to raise the federal funds target rate this year. The rate — at which banks lend funds to each other overnight — has been near zero since the end of 2008.
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But even if the Fed takes longer to raise the rate, it might not have much impact on the pace of the economic recovery. Fifty-seven percent of those polled for the semiannual survey say uncertainty over fiscal policy isn't restraining the pace of recovery. That's a reversal from August, when 53 percent said uncertainty was holding back recovery.
The share of respondents who believe U.S. monetary policy is too stimulative also dropped, from 39 percent in August to 36 percent in the most recent survey, which was conducted Feb. 5-19.
"Almost half the respondents believe current fiscal policy to be about right," said John Silvia, the chief economist at Wells Fargo and president of the association.
Thirty-one percent of respondents said the Fed should raise its target for the federal funds rate in the first half of this year, while 34 percent supported action in the second half. Twenty-four percent think the Fed should wait until 2016 to raise rates; 4 percent believe a rate hike should happen sometime after 2016.
Respondents were questioned before Federal Reserve Chair Janet Yellen presented her semiannual economic report to Congress at the end of February. Yellen said the Fed continues to be "patient," indicating a rate hike is unlikely until at least June.
Yellen said the U.S. employment situation is improving, with the unemployment rate down to 5.7 percent from a high of 10 percent in late 2009. But she said "too many Americans remain unemployed or underemployed, wage growth is still sluggish and inflation remains well below our longer-run objective."
One of the Fed's primary goals is stable prices, which it defines as inflation rising at 2 percent annually. For more than two years, inflation has been rising well below 2 percent and has fallen farther from that target in recent months.
Seventy-three percent of survey respondents said the Fed should retain its 2 percent inflation target.
The survey also questioned economists on several policy issues:
— Seventy-six percent said the Obama administration should ask Congress to lift a 1970s-era ban on crude oil exports, while 68 percent said the U.S. government should authorize construction of the Keystone XL pipeline.
— Forty-nine percent ranked immigration reform among their top 10 policy priorities, but only 14 percent said restrictions on high-skill immigrants adversely affect their companies. Nearly half said their companies feel no impact.