(Bloomberg News) The best six months of job gains since 2006 have helped reduce the odds of a third round of asset purchases by the Federal Reserve, according to a Bloomberg News survey of economists.
Sixty-one percent of respondents in a March 9-12 poll said Chairman Ben S. Bernanke will refrain from any action to expand the Fed's $2.89 trillion balance sheet this year. In January, 50 percent of those surveyed predicted more bond buying.
Bernanke, in Senate testimony before a March 9 jobs report, gave no sign he's considering a new program of so-called quantitative easing. Still, he repeated that the main interest rate is likely to stay near zero through at least late 2014 to boost a job market that remains "far from normal." The Federal Open Market Committee plans to release a statement at about 2:15 p.m. today after its meeting in Washington.
"They've seen a good bit of job growth and they weren't seeing that when they did QE1 and QE2," said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. "Job gains will probably stay fast enough that the Fed will feel the drop in the unemployment rate wasn't a fluke," he said.
None of the 49 economists in Bloomberg's survey anticipate that the Fed will announce new asset purchases today. In January, 14 percent predicted an announcement today.
If the Fed eventually eases further, economists are split on whether it would purchase bonds while taking steps to ensure such a move doesn't increase inflation pressures. Thirty percent of economists say the Fed would "sterilize" the impact of its purchases by using repurchase agreements and term deposits to prevent new money from entering the economy.
Vincent Reinhart, the chief U.S. economist at Morgan Stanley and a former monetary economist at the Fed until 2007, said the odds are even that the Fed will launch a new program of asset purchases. The central bank would help gain public acceptance of new bond-buying by blunting the probability such a measure will speed up inflation, he said.
"They can say they're trying to foster both parts of the dual mandate by buying long-term and mortgage-backed securities in support of the full-employment objective, but sterilizing the effect on the balance sheet to preserve price stability," he said in a March 7 interview. "I find it pretty unlikely we'd get this in March," he said.
Reinhart sees a one-in-four chance the Fed will extend its current "Operation Twist" program in which it buys longer-term securities and sells a corresponding amount of short-term securities, according to a March 5 research note. The Fed is scheduled to complete the program in June.