Federal Reserve may announce QE3 today

WASHINGTON: The Federal Reserve is likely to announce a third round of bond purchases on Thursday, according to almost two-thirds of economists in a Bloomberg survey, while also extending the duration of its zero-interest-rate policy to 2015.

Chairman Ben S Bernanke and his colleagues on the Federal Open Market Committee, will once again roll out unconventional policies to bolster economic growth of less than 2% in the second quarter and bring down unemployment stuck above 8% for 43 straight months, the survey showed.

“The Fed clearly wants to do more,” said Nick Sargen, a former San Francisco Fed economist who oversees $40 billion as chief investment officer at Fort Washington Investment Advisors in Cincinnati. “The economy is looking lacklustre, and the Fed has said all along that they feel it’s almost immoral that the unemployment rate is as high as it is.”

Two rounds of bond purchases totaling $2.3 trillion have failed to breathe life into the labour market, which Bernanke said last month is a “grave concern”.

That means policy makers will probably announce a new open-ended plan tied to a sustained improvement in the economy rather than specify an amount of purchases and an end-date, according to 32 of the 73 economists in the survey. Twenty-two expect a fixed duration and amount.