Federal Reserve officials are seriously considering giving the US economy—and especially the housing market—an added jolt with more quantitative easing.
Fed officials are likely to discuss such a move at their Jan. 24-25 meeting, when the central bank [cnbc explains] will issue its first quarterly forecast on interest rates under the new communication policy.
Two of the new voting members this year on the Federal Open Market Committee [cnbc explains] , which sets interest-rate policy, have recently suggested they would support more assets purchases.
San Francisco Fed President John Williams said that sustained high levels of unemployment, as forecast by many Fed members, "does make an argument that we should have more stimulus."
Another new voter, Cleveland Fed President Sandra Pianalto, said in a recent speech that economic models indicate the Fed "should be even more accommodative than it is today."
They join other members, including New York Fed President Bill Dudley and several Fed governors, who have openly suggested they would support more QE [cnbc explains] .
As part of an normal rotation of presidents, the makeup of the FOMC will become more dovish this year.
Three hawkish members are losing their FOMC vote—Richard Fisher of Dallas, Narayana Kocherlakota of Minneapolis and Charles Plosser of Philadelphia—along with only one dovish member, Charles Evans of Chicago.
They will be replaced by two more dovish members—Williams and Pianalto—and Dennis Lockhart of Atlanta, who is moderate but is seen as unlikely to dissent.
But a more dovish makeup is just one reason that more QE could become a reality this year.
Fed officials harbor doubts about the strength of the economic recovery and note there is considerable slack. And they expect inflation [cnbc explains] to remain moderate this year.
It is also significant that financial markets expects the Fed to act.
The newly released primary dealer survey from the Fed shows that top Wall Street fixed income dealers put a 60% probability on the Fed boosting the size of its balance sheet within a year...
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http://www.cnbc.com/id/45977098
Source: newsroom - meattradenewsdaily.co.uk
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