The U.S. economy will expand 1.8 percent in 2013, versus 2.2 percent in 2012, based on Bloomberg analyst surveys. The unemployment rate was 7.9 percent in January, versus the average of 6 percent for the past 20 years.
The Federal Reserve and Fidelity Investments both warned this week that the central bank’s unprecedented efforts to spur the economy risk sending costs higher.
Several policy makers said the Fed should be ready to vary the pace of its $85 billion in monthly bond purchases, according to the minutes of the central bank’s Jan. 29-30 meeting released yesterday in Washington.
Costs, Risks
The minutes said “many participants” expressed concern about “potential costs and risks arising from further asset purchases.” Several discussed “possible complications” that additional purchases could have as the Fed begins to end the policy, and a few mentioned inflation risks.
The Bank of Japan’s decision in January to adopt an inflation target of 2 percent adds to the odds that costs will rise, according to Boston-based Fidelity, which oversees $1.67 trillion.
“We have reason to believe that the Fed is likely to stay very accommodative for some time and that Japan is now taking a page from the U.S. Fed and stepping up its monetary stimulus,” Jurrien Timmer, co-manager of Fidelity Global Strategies Fund, wrote on the company’s website Feb. 18. The policies may create an “inflation scare,” the report said.
Fund Gains
ProShares UltraShort TIPS exchange-traded fund, which bets against U.S. inflation-protected debt, has gained 2.7 percent this year, according to data compiled by Bloomberg. It fell 13 percent in 2012.
Thirty-year TIPS yielded 0.59 percent ahead of today’s auction, versus 0.479 percent at the last sale of the securities in October.