Added Joel Naroff, founder of Naroff Economic Advisors: “When you base policy on current data that are volatile, you get volatile policy statements and that is not a way to run anything.”
Every year, the Federal Reserve Bank of Kansas City hosts dozens of central bankers, policymakers, academics and economists from around the world at an annual economic policy symposium in Jackson Hole.
The CNBC survey shows a high degree of frustration and Fed criticism among a group that normally supports or at least understands its policies. “Being on constant Fed Watch has become so exhausting,” writes Peter Boockvar, chief market analyst of The Lindsey Group, who is a persistent Fed critic. “We’ve been led in so many different directions only to be spun around again that until I see exactly what they do, I’m losing patience in listening to what they say.”
At the moment, markets appear to be banking on a continued easy- monetary policy. The average respondent now sees the next hike coming in January, a month later than the previous survey. The fed funds rate is seen rising to just 1.2 percent next year, and the central bank is now forecast to halt its hiking cycle, or reach its terminal rate at 2.29 percent by the fourth quarter of 2018. The Fed’s terminal rate is now 3 percent.
But the timing of the next hike is still a matter of debate. Hank Smith, co-chief investment officer of Haverford Investments, said if there’s a strong August jobs number, the Fed will hike in September. But Chad Morganlander, portfolio manager of Stifel Nicolaus (Washington Crossing Advisors) said, “The Federal Reserve will not risk unhinging the financial system before the election. Investors should expect the Fed message to change after November.”
Respondents don’t expect much of a policy surprise from the Jackson Hole meeting. Just over half expect the tone of the meeting to be neutral, while 24 percent worry it could be more hawkish and 16 percent say more dovish.
Jim Paulsen, chief investment strategist of Wells Capital Management, thinks hawkish comments out of the meeting could send bond yields back up to pre-Brexit levels.