Bloomberg News

QE3 May Come in April, Credit Suisse’s Jersey Says: Tom Keene

January 23, 2012

Jan. 20 (Bloomberg) -- The Federal Reserve may implement a third round of quantitative easing this spring to bolster the economy, according to Credit Suisse Group AG’s Ira Jersey.

“We do think the Fed is going to do another round of asset purchases later in the quarter, probably aiming for April,” Jersey, director of U.S. rates strategy at Credit Suisse in New York, said today in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “We are growing, we just don’t feel prosperous. It is a part of the job of the Fed to assure prosperity, one of the ways to do that is to kick- start housing,”

The policy-making Federal Open Market Committee meets Jan. 24-25. The central bank is forecast to keep its target for the federal funds rate at zero to 0.25 percent. The target has been at that level since December 2008 and the Fed has pledge to keep it there until mid-2013.

The central bank has purchased $2.3 trillion of mortgage and government bonds in two rounds of so-called QE. In September, it announced plans to sell $400 billion of short-term debt and use the proceeds to buy an equal amount of longer- maturity securities, in a program as nicknamed Operation Twist after a similar action in 1961 designed to contain borrowing costs for companies and consumers.

Round Three

Jersey said a third stimulus effort may be more focused toward the housing market and buying mortgage-backed securities.

A Bloomberg news survey conducted in November found 16 of the 21 primary dealers of U.S. government securities said Fed Chairman Ben Bernanke and his fellow policy makers would start another purchasing program during the first half of 2012. The dealers’ estimated that the Fed may buy about $545 billion in home-loan debt.

“We need to get confidence up, in particular business confidence up,” Jersey said. “That would help stimulate jobs, which helps stimulate the residential housing market, and that’s what gets you out of the doldrums.”

The Fed will wait for more economic data before deciding whether more bond buying is merited, the Wall Street Journal reported today. The central bank is planning to announce a revised communications strategy, including more information about interest-rate projections and objectives for inflation and jobs, the report said.

--With assistance from Cordell Eddings and Daniel Kruger in New York. Editors: Paul Cox, Kenneth Pringle

To contact the reporters on this story: Austen Sherman in New York at asherman18@bloomberg.net; Tom Keene in New York at tkeene@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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