March 3 (Bloomberg) -- The Federal Reserve is wrong to lower interest rates while inflation is still a threat and shouldn't bail out investors who made wrong-way bets, economists said in a survey by the National Association for Business Economics.

The share of respondents to the NABE survey saying monetary policy is ``about right'' fell to 48 percent, from 72 percent in August. Participants also took a dimmer view of fiscal policy, with 35 percent saying it's ``about right,'' versus 45 percent in the previous survey.

Fed officials and the government are trying to keep the economy from heading into a recession by cutting interest rates and introducing a fiscal stimulus package. While greater defaults on subprime mortgages and excessive debt still could drive down economic growth, reducing rates further and providing economic incentive risk stoking inflation, which already is elevated, economists in the NABE survey said.

``The most frequently cited concerns about lower interest rates are the threat of inflation and the sense that lower rates might `bail out investors who should have known better,' '' NABE said in a statement.

The Fed has cut the benchmark overnight lending rate between banks five times in the last six months, including an emergency 0.75 percentage-point reduction Jan. 22. Traders increasingly are anticipating central bank policy makers will reduce the rate by another 0.75 percent point at or before their March 18 meeting, according to futures prices.

Consumer, Producer Prices

Consumer and producer prices rose more than forecast in January, reports from the Labor Department showed last month. Ten percent of economists surveyed by NABE said inflation is a short-term risk to the U.S. economy, up from 6 percent in August.

More than half of survey respondents, 52 percent, said defaults on subprime mortgages and greater household and corporate debt were the biggest short-term risks to the economy. That is up from 32 percent in August.

Rising defaults have caused lenders to tighten standards and are putting more homes on the market at a time when sales have slowed. Weakness in the housing market has started to spread to other parts of the economy, which last quarter grew at a 0.6 percent annual pace, matching the slowest rate in five years.

Survey respondents considered rising health-care costs the biggest long-term risk to the economy, cited by 22 percent. The aging U.S. population was cited as the second-biggest risk.

Forty-two percent of respondents said they have low or relatively low concern about sovereign wealth funds. These funds, which are government-run, may grow to manage $12.5 trillion within five years, Deputy U.S. Treasury Secretary Robert Kimmitt said on Feb. 27.

The NABE polled 259 members from Feb. 1 to Feb. 15 for the survey.

To contact the reporter on this story: Courtney Schlisserman in Washington cshlisserma@bloomberg.net

Last Updated: March 3, 2008 00:15 EST