The business community has had enough QE
The business community’s love affair with the Fed’s unusually accommodative monetary policy may be over.
Why it matters: The Fed has signaled that it expects to soon announce plans to taper quantitative easing (QE), an emergency monetary policy program designed to keep interest rates low and bond markets very liquid.
- This tapering could introduce problems into the economy if the beneficiaries of the stimulus aren’t ready to see it go.
- However, if they are prepared, market volatility in light of any announcement could be limited.
By the numbers: The National Association of Business Economics (NABE) recently surveyed its members, which include corporate economists, financial planners, cost analysts and business leaders.
- As of August, 52% of respondents said monetary policy is “too stimulative,” double the 26% that said so when the survey was last conducted in March.
- Meanwhile, 47% say it’s “about right,” down from 72% in March.
- No one (0%) thinks it’s too restrictive, down from 2% in March.
State of play: According to recent Fed minutes, “most” officials agreed this tapering should start by the end of the year if the economic growth stays on track.
What they’re saying: While the NABE didn’t explicitly ask its members if the Fed “should” begin tapering this year, 52% did say that the Fed “will.”
- "I would guess that at least as high a share would support tapering to begin 2021," Ken Simonson, chief economist at the Associated General Contractors of America, tells Axios.
What to watch: Fed chair Jerome Powell joins the Jackson Hole Economic Policy Symposium remotely on Friday, where he’s expected to present his updated assessment of the economy.