Survey: 34 Percent of Wall Streeters Think Fed's Easing 'Will End Badly'

Tuesday, 29 Jul 2014 02:29 PM

By Dan Weil

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Much of Wall Street apparently has little faith that the Federal Reserve will be able to smoothly exit from its massive easing program.

CNBC's July survey of 36 top economists, analysts and fund managers found that 34 percent expect that the Fed's policy "will end badly." That equals the amount who think the Fed will
"navigate a smooth transition to more normal policy."

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A total of 26 percent believe there's an equal chance of a positive or negative outcome.

The Fed has kept its federal funds rate target at a record low of zero to 0.25 percent since December 2008. Its balance sheet has ballooned to $4.4 trillion through quantitative easing.

A total of 49 percent of respondents think Fed policy is too loose, 43 percent think it's just right and 6 percent think it's too tight.

The respondents' average forecast calls for the S&P 500 to close the year at 2,000. That's up 0.9 percent from 1,981.90 Tuesday morning.

The average estimate for the 10-year Treasury yield stands at 2.83 percent for year-end, up from 2.46 percent Tuesday morning.

Dallas Federal Reserve Bank President Richard Fisher, one of the Fed's inflation hawks, apparently agrees with those who think the Fed's policy is too accommodative.

"I believe we are at risk of doing what the Fed has too often done: overstaying our welcome by staying too loose, too long," he writes in The Wall Street Journal.

The Fed should consider shrinking its balance sheet as soon as this fall and raising interest rates early next year or sooner depending on the economy's strength, Fisher says.

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