Bernanke Seen Keeping Up Pace of QE Until Fourth Quarter
Chairman Ben S. Bernanke will probably start reducing the Federal Reserve’s $85 billion in monthly bond buying no earlier than the fourth quarter of 2013, economists said in a Bloomberg survey.
The Fed chief will probably halt the unprecedented easing in the first half of next year after expanding central bank assets to a record of about $4 trillion, according to median estimates by 46 economists surveyed March 13-18 before a two-day meeting of policy makers ending today. Unemployment will have fallen to 7.3 percent from its current 7.7 percent when the Fed starts to pull back on its buying, the economists said.
By slowly trimming purchases, Bernanke will retain the flexibility to ramp up the accommodation again if needed and avoid jolting the weak economic expansion with a sudden cutoff in stimulus, said Roberto Perli, a former economist for the Fed’s Division of Monetary Affairs.
“They will want to be gradual” in reducing accommodation, said Perli, managing director at International Strategy & Investment Group Inc. in Washington. Fed officials will probably proceed “on a meeting-to-meeting basis and say, ‘conditions have improved, we’ve seen progress, we can slow the pace,’ then reconvene at the next meeting and see what happened.”