Chances of Fed QE3 in September seen at 45 percent: poll
BANGALORE (Reuters) - Most economists do not expect the Federal Reserve to agree on a new round of bond purchases at its September meeting, a Reuters poll showed on Friday.
The poll of 61 economists gave a 45 percent chance of the Fed announcing a third round of quantitative easing (QE3) after its policy meeting on September 12-13. The forecasts ranged from chances of 5 to 80 percent.
The poll was based on contributions from economists at 17 Wall Street primary dealers, which deal directly with the Fed, and a further 44 economists from major global banks
Earlier this week, minutes of the Fed's July 31-August 1 meeting suggested the central bank was likely to deliver another round of monetary stimulus "fairly soon" unless the economy improved considerably.
But since the Fed meeting took place, some U.S. economic data has come in better than expected and most economists in the poll believed the central bank would wait and see if that trend continues rather than act next month.
"The data have improved and also we expect a solid August employment report as well (which) will show better job growth in the second quarter -- which was not available to the Fed at the August meeting," said Dean Maki, chief U.S. economist at Barclays Capital.
"In addition, financial market conditions are quite supportive of growth, in contrast to previous times when the Fed launched quantitative easing."
Among the 27 economists who gave at least a 50 percent chance of QE3 in the poll, the median estimate for the size of a new bond buying program was $600 billion.
The Fed has already bought $2.3 trillion in mortgage and government bonds in two prior rounds of QE to push borrowing costs lower in an attempt to stimulate growth.
One option discussed at the most recent Fed meeting was for an open-ended new program of bond-buying which could be adjusted according to how the economy performs.
A Reuters poll published earlier this month showed expectations that the Fed would resort to QE3 at some point in the future running at 60 percent. The majority of those respondents thought that September meeting was the most likely time for a new bond-buying program to be announced.
In the latest poll, 43 of 52 economists said they expected the Fed to extend its guidance for the likely timing of an eventual interest rate hike, which currently is for late 2014 at the earliest, further into the future.
Forty-three of 49 economists said the Fed will not lower the rate it pays to banks for parking excess reserves with it overnight, a move which some officials have proposed as a way to boost lending to companies and economic growth. Other Fed officials have expressed concerns that such a move -- which has already been undertaken by the European Central Bank -- could hurt U.S. money markets.
"The Fed is going to wait to see how the European Central Bank's practice for this zero interest rate builds for the time being,' said Michael Gregory, chief economist at BMO Capital Markets.
(Reporting by Rahul Karunakar; editing by Andrew Hay)
- Tweet this
- Share this
- Digg this