Stock版 - No QE3! Fed expected to twist again |
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发帖数: 2258 | 1 WASHINGTON (MarketWatch) — The Federal Reserve is likely to extend its
Operation Twist program at the end of its two-day meeting on Wednesday, a
growing number of Fed watchers said over the weekend.
“We now expect the Fed to ease policy further at next week’s meeting,”
Barclays Capital economist Dean Maki said in a note to clients. “We see a
short-term extension of Operation Twist as the most likely outcome.”
Michael Gregory, senior economist at BMO Capital Markets, said more and more
economists were jumping on the “bandwagon” of an extended Twist.
The move would serve several purposes, but would mainly show the Fed’s
resolve to act and help shore up confidence, said Millan Mulraine, economist
at TD Securities.
The current $400 billion Twist program is set to expire at the end of June.
It gets its name from the Fed trying to twist the yield curve by selling
short-term securities that it holds while buying longer-term securities.
Analysts said the Fed has about $180 billion of short-term Treasurys left to
sell. There was some speculation that the Fed might buy mortgage-backed
securities in the new round.
The U.S. economy is losing momentum just as global events that could derail
the recovery are gathering steam.
The risks of extreme financial contagion subsided Sunday night in the wake
of the Greek election. Economists said this would lower the odds a massive
new bond-buying program, known as the third quantitative easing or QE3. See
report on Greek election results.
The Fed has bought over $2.3 trillion of Treasurys and housing-related
assets to bring down interest rates. The Fed’s traditional short-term
interest-rate policy tool — the fed funds target — has been close to zero
since December 2008.
Fed Chairman Ben Bernanke certainly didn’t endorse more easing in his
testimony to Congress last week, and as a result, some analysts think the U.
S. central bank will stay on hold to see how things pan out over the next
few months. But they admit it is a close call.
One factor that still isn’t clear is how much of the current economic
slowdown is due to weather.
Analysts think that the warm winter may have brought forward some economic
activity, leading to slower growth over the past few months.
“It behooves the Fed to wait until the true economic trend is discernible,
” Gregory said.
But the economists who predict more Twist say it was May’s weak retail
sales data that will convince the Fed to jump back in and ease.
After the weak consumer-spending data, second-quarter gross domestic product
is forecast to come in below 2%, the fourth quarter out of the past five
with such sluggish growth.
Another way to bring down rates would be to push out the Fed’s guidance
that they are likely to keep rates steady beyond late 2014. But most
analysts are doubtful that Fed officials will take this step. |
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