“It would be appropriate to begin to moderate the monthly pace of purchases later this year” if economic data match Fed forecasts, Bernanke told lawmakers. “If the subsequent data continued to confirm this pattern of ongoing economic improvement and normalizing inflation, we expected to continue to reduce the pace of purchases in measured steps through the first half of next year, ending them around midyear.”
The Fed chairman plans to hold his next press conference after the FOMC’s Sept. 17-18 meeting, when Fed officials will next update their forecasts for the growth, unemployment and inflation.
Fed Governor Jeremy Stein, in a speech last month, identified the September meeting as a possible time for altering the pace of asset purchases.
The FOMC should “be clear that in making a decision in, say, September, it will give primary weight to the large stock of news that has accumulated since the inception of the program,” Stein said on June 28 in New York. The Fed should “not be unduly influenced by whatever data releases arrive in the few weeks before the meeting -- as salient as these releases may appear to be to market participants.”
Stein’s speech “was very much fixated on September,” said Laura Rosner, a U.S. economist at BNP Paribas SA in New York and a former researcher at the Federal Reserve Bank of New York. Bernanke’s semi-annual testimony to Congress last week “softened the schedule and brought back the data dependence that Stein reduced,” she said, referring to Bernanke’s comment that the FOMC will alter buying based on fresh economic indicators.
Fifty-one% of survey respondents said monetary policy is too easy, compared with 10% who said that the current stance is too tight. The Fed has pushed up its balance sheet to $3.54 trillion through bond buying and held its benchmark interest rate near zero to cut lending costs, spur growth and combat unemployment.
The jobless rate has fallen to 7.6%, while payrolls have risen an average of 201,830 jobs per month over the past six months. U.S. employers expanded payrolls by 195,000 in June for a second straight month, the Labor Department said July 5, capping 12 months of advances above 100,000 for the longest such streak since May 2000.
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