Investors love Federal Reserve Chairman Ben S. Bernanke. It's just his policies they don't like so much.
Sixty-six percent of investors have a favorable view of the 57-year-old former Princeton University economist, compared with 31% unfavorable, according to a quarterly global poll of 1,000 Bloomberg customers who are investors, traders or analysts conducted Jan. 21-24. Mr. Bernanke is more popular than his European counterpart, Jean-Claude Trichet, and scores higher than all other world political and economic leaders in the poll with the exception of German Chancellor Angela Merkel.
Investors don't have the same positive regard for the Federal Reserve's actions, particularly the decision in November to inject $600 billion of stimulus into the financial system. A plurality of respondents, 35%, say that policy, know as quantitative easing, hasn't had any significant effect on the economy; another 33% say the asset purchases risk a rise in inflation to dangerous levels. Just 27% say the plan to buy Treasuries is working as intended to help reduce unemployment and boost growth.
“The impact is not negligible but looks marginal to me,” says poll respondent Xavier Denis, chief economist at Societe Generale's wealth management unit in Paris. More broadly, “the Fed has handled the crisis pretty well so far in terms of central banking policy.”
Mr. Bernanke and his colleagues on the Federal Open Market Committee said Wednesdayafter their first policy meeting of the year that signs of faster economic growth didn't warrant paring back the program of buying Treasuries through June.
The expansion is “continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions,” the Fed said in a statement after a two-day meeting in Washington. Officials were unanimous for the first time since December 2009.
Forty-one percent of respondents say the Fed will pause once it completes the planned $600 billion in purchases through June, while 16% say the central bank won't need to employ the full amount of buying authorized. Thirty-eight percent say the Fed will go further and make additional purchases.
The purpose of the program, dubbed QE2 by analysts and investors for the second round of quantitative easing, is to keep interest rates low and support prices of assets such as houses and stocks, Mr. Bernanke has said. The Fed purchased $1.7 trillion of mortgage debt and Treasuries in the first round from December 2008 to March 2010.
Diane Swonk, who follows the Fed as chief economist at Mesirow Financial Inc. in Chicago, says Mr. Bernanke gets favorable ratings, though his policies are less popular, because investors may feel that “this guy is an expert on the Great Depression, and although we don't know what this program is doing, and we're not quite sure whether it's doing anything, we don't really want to find out what the world would be like without it.”
Since the Fed began the second round of quantitative easing on Nov. 3, the Standard & Poor's 500 index has gained 7.8%, while the dollar has risen 1.9% against a basket of six currencies. Yields on the benchmark 10-year Treasury note increased to 3.33% Tuesday from 2.57% on Nov. 3.
“Interest rates are higher, but I think that's mostly because the news is better,” Mr. Bernanke said Jan. 13 at a forum in Arlington, Va., hosted by the Federal Deposit Insurance Corp. “It's responding to a stronger economy and better expectations. So I think that the policy has helped.”
That's not how poll respondent Leonardo Bossini sees it. The analyst at Pacific Management Sam in Monaco says the asset purchases “will not have a significant impact in a short-term period.” Still, “this is a good step” for stimulating the economy in the medium to long term.
Asked which of four major central banks will be the first to raise its benchmark interest rate, 40% say it will be the Bank of England, followed by 27% for the European Central Bank, 20% for the Fed and 5% for the Bank of Japan. European customers who work in fixed income are most likely, at 52%, to pick the U.K.'s institution. The poll was conducted before Tuesday's report showing the U.K. economy unexpectedly contracted in the fourth quarter.
Among respondents to the question about effects of QE2, 40% in the eurozone were concerned about the program's inflation risks, compared with 31% of people in the U.S.
Among those in the U.S., 42% of people who work mainly in equities say the asset purchases risk dangerous inflation, compared with 25% of respondents who work in fixed income.
Mr. Bernanke's popularity stretched across all regions and political affiliations. His worst rating, 37% unfavorable, came from U.S. customers who work regularly in equities; 62% of that group also rated him favorably. The Fed chief peaked at 74% favorability in Bloomberg's first poll in July 2009. His positive rating was 61% in the November poll.
The admiration contrasts with that for U.S. Treasury Secretary Timothy Geithner, who is perceived unfavorably by 52% of U.S. respondents. Outside America, 57% give positive marks to Mr. Geithner.
The quarterly Bloomberg Global Poll of investors, traders and analysts was conducted by Selzer & Co. It has a margin of error of plus or minus 3.1 percentage points.
