Posted by: John S Kiernan

Federal Reserve rate hikes can send stock markets into a tizzy and put many consumers to sleep. But just because the nitty-gritty of the country’s fiscal policy isn’t thrilling to most does not mean we’re indifferent.

For one thing, the Fed’s four rate hikes since Dec. 2015 will cost credit card users an extra $6 billion in interest this year alone. Plus, WalletHub conducted a nationally representative survey to gauge public sentiment. And while most people still have some homework to do, we’ve got no shortage of opinions.

Below, you can find the complete results of WalletHub’s 2017 Fed Rate Hike Survey, which was conducted online from June 26 to July 3.

< >

• Adel S. Abadeer Professor of Economics at Calvin College
• Jason Jones Associate Professor of Economics at Furman University
• Andrew Keinsley Assistant Professor of Economics in the John B. Goddard School of Business & Economics at Weber State University
• Mark Rosa Adjunct Professor in the Department of Economics and Finance at the University of New Orleans
• Sucharita Sinha Mukherjee Associate Professor of Economics at the College of Saint Benedict
• Roisin O’Sullivan Professor of Economics at Smith College

Adel S. Abadeer Professor of Economics at Calvin College

What changes, if anything, do you think the Federal Reserve Board will make to interest rates at their December meeting?

I expect the Fed will raise the federal fund rate by 0.25 this month (to 1.5 percent).

Do you think the Fed should increase rates, decrease or hold interest rates steady given the current economic outlook?

I think the Fed should raise the federal fund rate gradually, until it reaches the optimal level of about 4 percent. The Fed should announce the schedule of future gradual increases (0.25 percent every time) ahead of time.

How many rates hikes do you believe the Fed is going to do in 2018? Why?

I believe the Fed should raise the federal fund rate 3-4 times in 2018, by 0.25 percent each time, ceteris paribus, to bring it to the normal level.

Do you believe the new Fed chairman appointed by President Trump will continue current Fed policy? What differences might we expect?

I believe Mr. Powell will follow Ms. Yellen’s policy and philosophy.

How might the departure of CFPB Director Cordray influence how banks are regulated, particularly those under the auspices of the Federal Reserve?

It is a wait-and-see game. However, I expect less regulation on banks and financial institutions associated with higher earnings, as the stock market shows record highs.Jason Jones Associate Professor of Economics at Furman University

What changes, if anything, do you think the Federal Reserve Board will make to interest rates at their December meeting?

They will raise rates a quarter of a point.

Do you think the Fed should increase rates, decrease or hold interest rates steady given the current economic outlook?

They should follow through with their plan, and raise rates a quarter of a point in December.

How many rates hikes do you believe the Fed is going to do in 2018? Why?

Two over 2018 -- they need to normalize rates, so they have room to lower rates if the economy turns toward a recession.

Do you believe the new Fed chairman appointed by President Trump will continue current Fed policy? What differences might we expect?

Yes, Powell will carry through the same policy as Yellen -- no changes expected to what they have already communicated.

Andrew Keinsley Assistant Professor of Economics in the John B. Goddard School of Business & Economics at Weber State University

What changes, if anything, do you think the Federal Reserve Board will make to interest rates at their December meeting?

The narrative the Fed has put out there for the past few months has suggested that they will raise interest rates at their December meeting. Though inflation is still slightly below their targeted level, an unemployment rate well below the full employment level should give them enough incentive to raise rates. Markets in general are also expecting a hike, with the Fed Funds Futures market currently suggesting about a 93 percent probability.

Do you think the Fed should increase rates, decrease or hold interest rates steady given the current economic outlook?

Personally, I’d be a little more hesitant about raising rates at this point. Inflation has been below target for a while now, and there still appears to be slack in the labor market, despite the low unemployment measure. After all the rhetoric of the past few months, however, the Fed has essentially backed itself into a corner, so leaving rates unchanged in December would likely send a signal to the markets that the Fed is worried about the economy.

How many rates hikes do you believe the Fed is going to do in 2018? Why?

The last “dot plot” released by the Fed suggests that they’re planning on three rate hikes in 2018. The plan, as it has been for years now, is “slow and gradual,” so as to not cause too much disruption. Granted, there is a lot of potential movement on the fiscal policy side, so these plans are definitely subject to any changes in the economic condition. A significant tax break could warrant more hikes, while any issues with the debt ceiling debate could push them to leave rates unchanged.

Do you believe the new Fed chairman appointed by President Trump will continue current Fed policy? What differences might we expect?

As I mentioned, all the Fed’s plans are subject to any changes in economic conditions. That being said, soon-to-be-Chairman Powell has never dissented in an FOMC vote, so there’s not much reason to believe that the general plan will change when Chairwoman Yellen leaves office. I expect minimal differences in policy, if any at all.

Mark Rosa Adjunct Professor in the Department of Economics and Finance at the University of New Orleans

What changes, if anything, do you think the Federal Reserve Board will make to interest rates at their December meeting?

I think they will be very consistent, and raise rates by 25 basis points (one quarter of one percent).

Do you think the Fed should increase rates, decrease or hold interest rates steady given the current economic outlook

I think if they choose to raise rates in December, they should not raise rates for at least six months. Inflation is not a problem; the economy is growing at a good pace.

How many rates hikes do you believe the Fed is going to do in 2018? Why?

I think they should do no more than two. Might we get a third rate hike? Possibly. As stated in the previous question, there is not a compelling case to raise rates three or more times.

Do you believe the new Fed chairman appointed by President Trump will continue current Fed policy? What differences might we expect?

I think the big-ticket item is the Fed’s balance sheet and winding down previous purchases. This administration is friendlier to businesses, I think that will be recognized by the Fed and not raise rates too quickly.

How might the departure of CFPB Director Cordray influence how banks are regulated, particularly those under the auspices of the Federal Reserve?

CFPB needs to be placed under the control of the Fed or dissolved; the U.S. does not need another layer of bureaucracy. Having said that, the banking industry (and the general public) is already benefitting from the administration’s recognition of the need to take a more practical look at regulation. Obama never saw a regulation he didn’t like; the regulatory climate had gone too far after the credit crisis. The positive effects of the new administration are already being felt, in a positive way.Sucharita Sinha Mukherjee Associate Professor of Economics at the College of Saint Benedict

What changes, if anything, do you think the Federal Reserve Board will make to interest rates at their December meeting?

There is a good chance that interest rates might be increased. The Fed has been talking about it for a while now.

Do you think the Fed should increase rates, decrease or hold interest rates steady given the current economic outlook?

Well, there is excess liquidity in the system and inflation -- though low as yet -- is creeping up. The economy is at the natural rate of unemployment, and growth is steady. All of this suggests interest rates could comfortably be increased.

How many rates hikes do you believe the Fed is going to do in 2018? Why?

That is really hard to predict. Dr. Yellen was less likely to do so. That being said, it would be important to see how the economy responds to any possible tax plan.

Do you believe the new Fed chairman appointed by President Trump will continue current Fed policy? What differences might we expect?

I really do not know (as most economists do not) about Jerome Powell. He is not an academic or someone with an established view on monetary policy. So, I am really not sure about what to expect. I can expect him to be more hawkish.

How might the departure of CFPB Director Cordray influence how banks are regulated, particularly those under the auspices of the Federal Reserve?

This is a very bad sign, and I would be very concerned. Though some might suggest Cordray may have overstepped his regulatory bounds, regulating the financial system is imperative for a well-functioning economy with a developed financial market, and so much of it running on credit. It would be interesting to see who becomes the permanent director. Ideally, the CFPB and the Fed should not be at loggerheads.Roisin O’Sullivan Professor of Economics at Smith College

What changes, if anything, do you think the Federal Reserve Board will make to interest rates at their December meeting?

I think an increase of 25 basis points in the target range for the Federal Funds rate is the most likely outcome. That would bring the range to 1.25-1.5 percent.

Do you think the Fed should increase rates, decrease or hold interest rates steady given the current economic outlook?

Looking at both elements of the Fed’s dual mandate -- price stability and maximum employment, I think an increase in the target range is the appropriate policy action. The evidence is mounting that the labor market is converging on full employment. While both headline and core (excluding food and energy) measures of inflation have been below the medium-term target of 2 percent, they are both firmly in positive territory, and the overall trajectory of the headline personal consumption expenditure index, the inflation measure favored by the Fed in gauging price stability, has been consistent with reaching the medium-term objective.

In assessing the stance of monetary policy, I find it useful to think about how the current federal funds rate compares to a “neutral” benchmark, that is, a federal funds rate that would neither have a stimulating nor a dampening impact on the macroeconomy. We can also think of it as the level of the federal funds rate that would be consistent with the economy being at its optimal level, what economists usually refer to as long-run equilibrium.

As the federal funds rate is a nominal interest rate, and so combines a real return with compensation for inflation, gauging its neutral level involves combining an estimate of the long-term real interest rate (often referred to the natural rate of interest or r-star) with the inflation target. A combination of factors has resulted in a fall in r-star to historically low levels, and a reasonable estimate of its current level would be in the 0-1 percent range. Combining this with a medium-term inflation target of 2 percent would put the neutral federal funds rate in the 2-3 percent range.

Comparing the current target federal funds rate range to this benchmark indicates that the current stance of monetary policy is stimulative. In an economy that appears to be at or approaching full employment, removing that stimulus is the appropriate policy action.

How many rates hikes do you believe the Fed is going to do in 2018? Why?

I think three increases in increments of 25 basis points is a likely outcome, assuming the economy continues on its current trajectory without any major shocks. Thinking again of the neutral level of the federal funds rate being in the 2-3 percent range, and the tendency for monetary policy actions to be gradual and smooth, this would put policy on a smooth and steady course back to neutral.

The projections for the path of the federal funds rate provided after the September FOMC meeting are consistent with this view. A new set of economic projections will be released after the December meeting, providing an update on the thinking of FOMC participants.

Do you believe the new Fed chairman appointed by President Trump will continue current Fed policy? What differences might we expect?

Based on his voting behavior since joining the Board of Governors in 2012, I don’t anticipate any radical changes to the anticipated path of policy rates, due to the appointment of Governor Powell as the next Fed Chairman. I think the potential for uncertainty surrounding future FOMC decisions springs more from the unknown future composition of the committee more broadly, with three current vacancies on the Board of Governors, the pending retirement of the President of the New York Federal Reserve Bank and the possibility that Chair Yellen may resign from the Board on completion of her chairmanship.

from Wallet HubWallet Hub


via Finance Xpress