There is a 75% chance the Federal Reserve Board will raise interest rates again, according to Pensions & Investments' Reader Advisory Panel.
By a 66 to 37 margin, the members of the panel who expressed an opinion believe another interest rate hike might be needed to choke off the possibility of inflation.
And by an 82 to 25 margin, the respondents believe the interest rate hikes imposed by the Federal Reserve so far this year were justified.
Nevertheless, the panel is not sanguine about the prospects for inflation. The average expectation for the rate of inflation as measured by the Consumer Price Index is 3.45%, and the median expectation is 3.5%. The highest expectation is 5.5%; the lowest is 2%.
The panel members are heavily in favor of an independent Federal Reserve system.
Only two panelists said the Fed should be more responsive to Congress and the White House, as opposed to being more independent of both branches of government.
While 54 respondents said the current degree of independence was about right and should not be changed, 49 said the Fed should be more independent.
Of those who felt the current degree of independence was about right, one commented: "It's working now. Why change it?"
Another commented: "The Fed needs to be protected from political expediency, but more independence is out of the question."
Said another: "The current arrangement represents the appropriate balance of power between a political body (Congress) and a business (the Fed)."
Still another respondent commented: "Independent technical analysis and execution of policies to achieve stated goals should be independent, but (the Fed should be) brought to account for failure to achieve those goals."
Other panel members had different reasons for leaving the current arrangement alone, noting the power of the fixed-income markets to make or break Fed policy.
"As the international credit and currency markets are becoming much more influential, and governments less so, the current relationship seems appropriate," said one.
Another expressed a concern that too much independence at the Fed also could be a problem: "While the Fed should not be used as a policy-making tool of the White House, greater independence could give the Fed undue political clout."
However, those in favor of more independence argued the Fed should not be subject to political pressure.
"Politicizing the Fed dilutes its effectiveness," said one respondent. "Congress and the president are totally unqualified and lack the integrity to make objective decisions."
"Politicians will trade short-term gains (jobs, elections, etc.) for long-term losses (inflation, stagflation, economic growth)," said another.
If the Fed were more independent, said another respondent, it would be "less concerned about the political impact of its decisions, and more concerned about appropriate financial policy."
As it is, said another, "too much political maneuvering for elections could hurt the economy. Only by remaining independent can objectivity be maintained."
"The stability and integrity of our fiat money is essential. Even an ounce of politics in the process is bad," another commented.
"Congress and the president can't seem to look beyond the next election. An independent Fed needs to be able to take a longer perspective."
Asked if they were concerned about derivatives, 73% of the respondents said they were very or somewhat concerned, while the remainder were not concerned.
However, only 56% of the respondents said more regulation of derivatives is needed, and most of those favored some combination of greater disclosure by all involved with derivatives and increased capital requirements.
Only 9% of those responding saw any need for restrictions on derivative instruments.
One respondent called for licensing or certification for portfolio managers who use derivatives, while another said banks and employee benefit plans should be forbidden to use derivatives.
Questionnaires were sent to 200 panel members; 108 answered all or most of the questions before the deadline.