Given the Federal Reserve’s continued emphasis on buying up bonds, a Bloomberg survey of economists suggests that bond buying will hit $1.14 trillion by the time the Fed’s program ends in Q1 2014.
Fed Chairman Ben Bernanke intends to continue the Fed’s stratagem of buying $40 million per month in mortgage bonds and $45 billion per month of Treasuries.
“To get to the point where Bernanke would be comfortable letting up, you have to have a good solid string of economic reports that you’re just not going to get” this year, said Eric Green, global head of rates and FX research at TD Securities Inc. in New York and a former New York Fed economist.
Today, the Federal Open Market Committee is set to meet and it is expected that the asset buying program will be reaffirmed. The economist survey indicated a gap between the FOMC’s projected growth rate of 2.3-3 percent and the economists’ own median projection of 2 percent.
Since the Fed has explicitly linked its bond buying program to national unemployment numbers, there needs to be a significant improvement across the labor market before the Fed can even consider ending the program. The survey, however, didn’t show much faith in the power of asset purchases to ease the nation’s 7.8 percent unemployment.
Overall, last year saw 1.8 million jobs added to the economy, and the survey suggests that economists believe quantitative easing could add just about 250,000 jobs over this year.