A new survey has found that Wall Street professionals expect the U.S. Federal Reserve to hold interest rates at historic lows this year despite signs that the American economy is overheating.
A new Fed Survey conducted by CNBC found that respondents forecast the U.S. Federal Reserve will not reduce its $120 billion U.S. of asset purchases until January 2022, and the first interest rate hike is unlikely to happen before December 2022.
Yet 68% of the 34 survey respondents said the central bank does not need to make those asset purchases to help the market function and 65% said the Fed does not need to do them to help the economy.
And 56% of respondents said the Fed should respond to the massive fiscal stimulus from the Biden administration by cutting back asset purchases and raising interest rates sooner than expected.
The survey highlights the extent to which the U.S. central bank has convinced markets that it will remain on the sidelines this year despite growing economic optimism and fears of rising inflation.
Survey respondents expect the U.S. economy to grow more than 6.5% this year, the unemployment rate to decline to 4.9% and for inflation to rise to 2.5%.
Respondents also see the S&P 500 stock index near 4,250 by year-end and topping 4,500 by the end of 2022. The 10-year yield is forecast to approach 2% this year and increase above 2.4% next year.
Seventy percent (70%) of respondents view stocks as overvalued relative to their fundamental outlooks for economic and earnings growth.
