The Federal Reserve can avoid unprecedented losses by never selling mortgage-backed securities from its record $3.84 trillion balance sheet, according to updated estimates by Fed economists in Washington.
Federal Reserve Bank of Philadelphia President Charles Plosser said unemployment will probably fall to 7% at the end of 2013 and he would favor reducing the Fed’s $85 billion monthly pace of bond purchases next month.
During the past three years, the Fed planned to cut accommodation early in the year only to boost it after economic growth lagged behind its forecasts. This time, Federal Reserve policy makers are prepared for the summertime slump.
Several Federal Reserve policy makers said the central bank should be ready to vary the pace of their $85 billion in monthly bond purchases amid a debate over the risks and benefits of further quantitative easing.