Fed Announces Quantitative Easing Plans

Bernanke says Fed is on course to end asset buying by mid-2014, but he does not anticipate raising interest rates anytime soon.

Federal Reserve Chairman Ben S. Bernanke said the central bank may start dialing down its unprecedented bond-buying program this year and end it entirely in mid-2014 if the economy finally achieves the sustainable growth the Fed has sought since the recession ended in 2009.

The Federal Open Market Committee (FOMC) today left the monthly pace of bond purchases unchanged at $85 billion, while saying that “downside risks to the outlook for the economy and the labor market” have diminished. Policy makers raised their growth forecasts for next year to a range of 3 percent to 3.5 percent and reduced their outlook for unemployment to as low as 6.5 percent.Esther George quote

Open-Ended

Bernanke is expanding the Fed’s balance sheet toward $4 trillion as he seeks to reduce a jobless rate that stands at 7.6 percent after four years of economic growth. The Fed’s open- ended purchases, started last September and expanded in December, are unprecedented. In two previous rounds, it specified total purchases in advance.

Economists’ Forecasts

No change in policy was expected at today’s meeting. Fifty-eight of 59 economists in a June 4-5 Bloomberg Survey predicted the central bank would maintain the pace of purchases.

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