CHICAGO (Reuters) - The Federal Reserve added modestly to its support for the lackluster U.S. economic recovery at its June 19-20 policy meeting, tacking on six more months to a bond-maturity extension program aimed at pushing down borrowing costs.
The $267 billion extension of “Operation Twist” came on top of the Fed’s renewed pledge to keep short-term interest-rates near zero through at least late 2014 as long as economic conditions stay weak.
But the U.S. central bank, which has bought $2.3 trillion in securities to bolster the economy in the aftermath of the Great Recession, stopped short of unleashing a new round of bond-buying, despite three straight months of disappointing jobs growth at home and a worsening of the euro zone’s financial and debt crisis.
Wall Street’s top bond firms still see a 50 percent chance the Fed will begin a third round of quantitative easing, or QE3.
The following are recent comments from policymakers (an asterisk next to a name denotes the person in 2012 is a voting member of the policy-setting Federal Open Market Committee):
ST. LOUIS FED PRESIDENT JAMES BULLARD, June 22
“QE3 I think is viewed as still having a pretty high hurdle. We can do that, and I think it would be effective, but we would be taking a lot more risk on our balance sheet and we’d be going further into unchartered territory.”
*RICHMOND FED PRESIDENT DENNIS LACKER, June 22
“I do not believe that further monetary stimulus would make a substantial difference for economic growth and employment without increasing inflation by more than would be desirable.”
*FED CHAIRMAN BEN BERNANKE, June 20
“If we are not seeing sustained improvement in the labor market that would require additional action. ...We still do have considerable scope to do more and we are prepared to do more.”
* SAN FRANCISCO FED PRESIDENT JAMES WILLIAMS, June 11
“The European sovereign debt crisis threatens banks in that continent, and, by extension, elsewhere. Clearly, it represents a significant threat to financial stability.”
CHICAGO FED PRESIDENT CHARLES EVANS, June 11
“The European situation is one that we’re monitoring very closely, and it does give one pause about what it means for the U.S. economy and the global economy.
* ATLANTA FED PRESIDENT DENNIS LOCKHART, June 11
“I don’t think any of the options should be taken off the table under the current circumstances. But I’m not convinced at this moment that the circumstances quite yet call for additional action.”
* FED CHAIRMAN BEN BERNANKE, June 7
“The situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely. As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. economy in the event that financial stresses escalate.”
* BERNANKE, June 7
“The key question that we will be facing is: Will economic growth be sufficient to achieve continued progress in the labor market?”
BOSTON FED PRESIDENT ERIC ROSENGREN, June 7
“The global economy continues to be at risk. I think one of those risks is that some of the future problems are starting to seep into our forecasts for now. So even if those downside risks don’t materialize it is affecting behavior.”
* FED VICE CHAIR JANET YELLEN, June 6
“There are a number of significant downside risks to the economic outlook, and hence it may well be appropriate to insure against adverse shocks that could push the economy into territory where a self-reinforcing downward spiral of economic weakness would be difficult to arrest.”
* YELLEN, June 6
“I am convinced that scope remains for the (Fed) to provide further policy accommodation either through its forward guidance or through additional balance-sheet actions.”
Reporting by Mark Felsenthal, Jonathan Spicer, Pedro da Costa, Ann Saphir