Chairman Ben S. Bernanke will probably reduce the Federal Reserve’s monthly bond buying in the fourth quarter to $50 billion from $85 billion as he begins to unwind record stimulus, economists said in a Bloomberg survey.
Policy makers must find a way to slow the pace of purchases enough to signal confidence the economy is strengthening without prompting a sudden rise in interest rates, said former Fed economists Michael Feroli and Joseph LaVorgna. They said that probably means the Fed, which concludes a policy meeting today, will follow a three-step strategy to wind down bond buying.
The bond purchases, known as quantitative easing, have helped push up stock prices and reduce bond yields. The yield on the 10-year Treasury note yesterday was little changed at 1.67 percent in New York, near a low for 2013, as signs of weakness in the economy allayed concerns the Fed may curtail bond buying. The Standard & Poor’s 500 Index closed at a record high 1,597.57, as a rise in consumer confidence offset a drop in business activity.
The Labor Department on May 3 will probably say the unemployment rate in April remained unchanged at 7.6 percent as employers added 148,000 jobs, according to the median estimate in a separate Bloomberg survey.