Investors Worried About Inflation – Want Fed To Act Now
Various surveys recently have shown investors growing more concerned about rising inflation. The Consumer Price Index rose a surprising 6.2% over the last year according to the latest data for October, the highest yearly rate since 1990.
A survey released last week found that sophisticated investors are becoming alarmed about the latest jump in inflation and are calling for the Fed to take immediate action to head it off. The latest CNBC Fed Survey – which polls knowledgeable market participants including economists, fund managers, market strategists and others – found that 60% want the Fed to halt all asset purchases NOW. Forget tapering, just stop.
This abrupt shift is quite surprising as it would almost certainly lead to a rise in short-term interest rates. Yet the CNBC Fed Survey crowd also indicated they believe the Fed should start raising short-term interest rates sooner than the Fed currently plans. Inflation has clearly got these sophisticated investors spooked!
As I discussed in Forecasts & Trends on Tuesday, the Fed announced last week it will begin reducing its $120 billion in monthly asset purchases by $15 billion a month starting later this month. It plans to end its monthly purchases of Treasury bills and mortgage-backed securities by next May. It currently doesn’t expect the first interest rate hike until December of next year.
Yet the CNBC Fed Survey crowd apparently believes all of that should be accelerated significantly. These folks are clearly worried inflation has gotten ahead of the Fed. This is in part due to some forecasters predicting that inflation has not peaked yet. In addition to calling for an immediate end to all Fed asset purchases, the CNBC Fed Survey called on the Fed to move up its date for the first interest rate hike from December to September of next year.