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Fed maintains QE pace, prepared to alter as economy evolves

By Joshua Zumbrun and Jeff Kearns, Bloomberg

May 2, 2013 • Reprints

Future Inflation

The committee also said it “anticipates that inflation over the medium term likely will run at or below its 2% objective.”

Policy makers such as St. Louis Fed President James Bullard have voiced concern about inflation running below their longer- run target of 2%. Their preferred gauge of inflation rose 1% from a year earlier in March, and Bullard was one of three regional Fed bank presidents who said last month that disinflation may warrant stepped-up stimulus.

Bullard has proposed the Fed alter purchases by $10 billion to $15 billion per meeting depending on the outlook for the economy. Fed Vice Chairman Janet Yellen and New York Fed President William C. Dudley have backed the idea of adjusting purchases, without providing an estimate of how much to shrink or enlarge them at each step.

The purchases will remain divided between $40 billion a month of mortgage-backed securities and $45 billion a month of Treasury securities. The central bank also will continue reinvesting the proceeds from maturing debt, according to today’s statement.

‘Financial Imbalances’

Kansas City Fed President Esther George dissented for the third meeting in a row, saying the continued “high level of monetary accommodation increased the risks of future economic and financial imbalances.”

None of the 47 economists in an April 25-29 Bloomberg survey expected the central bank to alter the pace of purchases at today’s meeting. Only one of the economists surveyed expected the Fed to expand purchases, and the others said the Fed’s first move would be to shrink or end them entirely.

Fed officials are seeking to avert a repeat of the last three years, when a summer slump scuttled optimism about the economy’s strength. In each of those instances, the Fed planned to end stimulus programs early in the year, only to boost accommodation after growth lagged behind its forecasts.

The economy expanded at a 2.5% annualized rate in the first quarter, the Commerce Department said last week. The gain followed a 0.4% fourth-quarter advance, and it trailed the 3% gain that was the median estimate of 86 economists surveyed by Bloomberg.

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Related Terms
US Federal Reserve 8527bank 6455fed 3336financials 2975Standard & Poor 2008Congress 1894Economy 1513Federal Reserve 1207Department of Labor 1011retail sales 850Department of Commerce 838Federal Open Market Committee 773Qe 751Ben S. Bernanke 751Janet Yellen 621Ben S 613New Jersey 590employment 474Arizona 473Unemployment 353Institute for Supply Management 296QUANTITATIVE EASING 257North Carolina 251Washington 224New York Fed 209James Bullard 190BNP Paribas 171William C. Dudley 106ADP Research Institute 85Bloomberg Radio 60Kansas City Fed 59Minneapolis Fed 40Yale University 40Robert Shiller 40Esther George 38Wells Fargo Securities LLC 29bank presidents 21Weyerhaeuser Co. 12Julia Coronado 12John Silvia 8Starts 6Keith Hembre 3Nuveen Asset Management LLC 2Dan Fulton 1

Free Newsletter Modern Trader Follow

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