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Fed Policy ‘About Right’ After Pivot, Economists Say

Christopher Condon and Catarina Saraiva
Fed Policy ‘About Right’ After Pivot, Economists Say 

(Bloomberg) -- The Federal Reserve is getting monetary policy “about right” after pivoting in recent weeks to a decidedly more dovish posture than at the end of 2018, according to a plurality of economists surveyed by Bloomberg.

Just under half of all respondents to a March 21-22 questionnaire expressed approval of the Fed’s outlook for interest rates; 37 percent said the Fed was too dovish, while 14 percent said policy makers were too hawkish.

The Federal Open Market Committee last week signaled that policy makers are unlikely to raise rates at all this year, compared to the two 2019 hikes officials foresaw in December. Only part of that downgrade was anticipated, and Chairman Jerome Powell went further in his March 20 post-FOMC meeting press conference, calling too-low inflation “one of the major challenges of our time.’’

Slightly more than half of economists surveyed said they’d downgraded their expectations for interest-rate increases this year after the FOMC meeting. Of the 37 polled, 20 now believe the Fed is done raising rates in this cycle. Investors have increased bets that the central bank will in fact cut rates before the end of the year, according to pricing in interest-rate futures.

Asked whether President Donald Trump had influenced the Fed’s shift in tone by criticizing their four 2018 rate hikes, 75 percent said it had no effect while 25 percent said it had “some” impact.

The president publicly criticized the Fed for raising rates last year via Twitter and in interviews. Bloomberg News reported that at one point he discussed firing Powell as his frustration with the central bank chief intensified after it hiked again in December.

Stephen Moore, picked by Trump on Friday to be governor on the Fed board -- subject to Senate confirmation -- said in an interview on Bloomberg Television following the news of his selection that the December move had been a “very substantial mistake.”

(Updates with investors increasing bets on a rate cut in fourthg paragraph.)

To contact the reporters on this story: Christopher Condon in Washington at ccondon4@bloomberg.net;Catarina Saraiva in Houston at asaraiva5@bloomberg.net

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Alister Bull, Ros Krasny

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