(Bloomberg News) Federal Reserve officials may strengthen their commitment to record monetary stimulus as soon as today after a faltering economic recovery and a U.S. credit-rating cut provoked a rout in global stocks.
By a 52 percent to 48 percent margin, respondents in a Bloomberg News survey said the Fed would ease policy this year through monetary tools or statement language. If the central bank acts, 59 percent said it would communicate that the federal funds rate, balance sheet or both will remain especially stimulative for a longer period or more specific amount of time.
Chairman Ben S. Bernanke and his colleagues are weighing the use of more untested policy tools after two rounds of bond buying totaling $2.3 trillion failed to spur sufficient economic growth and reduce unemployment below 9 percent. The Federal Open Market Committee holds its regular meeting today in Washington following the worst day for U.S. stocks since December 2008.
"The odds of more dramatic action are higher," said Vincent Reinhart, a former chief monetary policy strategist at the Fed. "However, they might not want to be seen as responding so directly to equity prices," Reinhart said, adding that policy makers may wait to signal a new round of bond purchases until Bernanke gives a speech on Aug. 26 at a Fed conference at Jackson Hole, Wyoming. Reinhart is a resident scholar at the American Enterprise Institute in Washington.
Stay At Record
The FOMC began its meeting around 8 a.m. in Washington and plans to issue a statement at about 2:15 p.m. Julia Coronado, chief economist for North America for BNP Paribas in New York, said the central bank may say today the economic slowdown is persisting longer than expected. Policy makers may also say the Fed's securities portfolio will remain at a record for an "extended period" and replace shorter-term securities with longer maturities to reduce rates on longer-term debt, she said.
The Fed reiterated in June that the overnight interbank lending rate would be "exceptionally low" for an "extended period" and said the policy of reinvesting maturing securities to keep the balance sheet steady would be maintained, without saying how long.
The "extended period" phrase means that the FOMC is at least two or three meetings away, or "significantly longer," from taking any action, Bernanke said at a June press conference.
Bernanke isn't scheduled to hold a press briefing today, unlike after the June 21-22 policy meeting. He holds news conferences only after two-day meetings, when the Fed releases updated economic forecasts. Forecasts are next scheduled for release after the Nov. 1-2 gathering. On such days, the Fed releases its announcement at around 12:30 p.m.
Debt Crisis