Economists say Fed is 'too' tight

survey of economists in the US showed that the Fed’s monetary stance is perceived as too tight. Economists have come to believe that the Fed is keeping financial conditions “a bit too tight.” According to the NABE survey, 21% of respondents rate the US central bank’s current monetary policy stance as “too restrictive.” The survey results, published ahead of NABE’s annual economic policy conference in Washington this week, were compiled between Jan. 23-30, just before the Fed’s latest policy meeting on Jan. 30-31. Fed officials are in their fastest tightening cycle since the early 1980s. The Fed raised its policy rate by more than five percentage points between March 2022 and July of last year. Inflation is set to decline rapidly in the second half of 2023, reinforcing expectations in financial markets that the central bank will begin cutting interest rates in early 2024. At the January meeting, Fed Chair Jerome Powell and his colleagues left policy rates unchanged, signaling that the next meeting in March was unlikely to be a starting point for rate cuts. Market pricing suggests easing will begin in May. Powell cited solid economic growth and a strong labor market as reasons why the Fed should take its time before starting to roll back tightening measures. Employment data released on Feb. 2 showed that employment growth was much higher than expected at the beginning of the year, and employment growth in 2023 was also revised higher.