Bernanke said in a Nov. 20 speech that Fed stimulus shows no sign of fueling consumer-price increases beyond the central bank’s 2 percent target. “Inflation over the next few years is likely to remain close to or a little below the committee’s objective,” he said in New York.
Housing Rebound
The rebound in housing hasn’t shown signs of enlivening the labor market. Payroll growth averaged 153,000 in 2011 and 151,000 so far in 2012. Employment climbed by 146,000 in November, the Labor Department said last week. The jobless rate fell from 7.9 percent the month before as the labor force shrank.
Economists don’t predict growth will take off in 2013. Gross domestic product expanded at a 2.7 percent annual pace in the third quarter, according to Commerce Department data. Economists in a separate Bloomberg survey forecast growth of 2 percent in 2013.
Also weighing on the economic outlook are more than $600 billion of tax increases and spending cuts scheduled to take effect next year unless Congress acts. The Congressional Budget Office has said the fiscal tightening would probably push the economy into a recession next year.
Treasury purchases would constitute “insurance that if there’s a failure to agree between Congress and the president, the Fed is out there to prevent an even bigger downdraft,” Silvia said.
Probably Wait
The FOMC will probably wait until its March 19-20 meeting before adopting thresholds on unemployment and inflation to indicate when it will consider raising the federal funds rate, according to the median estimate of surveyed economists.
Forty-eight of 49 economists say the Fed won’t set the thresholds tomorrow. The Fed currently says it will keep its main interest rate near zero at least through mid-2015.
The Fed hasn’t spelled out limits on the duration or size of its current accommodation, which was announced in September.