Bloomberg News

Fed Dealer Survey Shows Declining Odds of More Asset Purchases

February 22, 2012

Feb. 16 (Bloomberg) -- The Federal Reserve Bank of New York’s survey of primary dealers conducted before policy makers met last month showed the firms saw the probability of another round of asset purchases declining from December.

The median respondent saw a 55 percent chance that the Fed would expand its balance sheet through securities purchases within one year, down from 60 percent odds in the survey conducted before the Federal Open Market Committee’s Dec. 13 meeting, according to results released today by the New York Fed. Dealers also became more confident the U.S. economy would avoid a recession.

Fed officials are keeping open the option of a third round of bond purchases in case the economy weakens or inflation stays low. “A few” members of the FOMC said economic conditions could warrant buying assets “before long,” and others indicated that action would become necessary if the “economy lost momentum” or price gains seemed likely to remain lower than the Fed’s 2 percent goal, according to minutes of their Jan. 24-25 meeting released yesterday in Washington.

Central bankers at their last meeting adopted a plan to hold interest rates near zero at least through late 2014 to spur growth and reduce unemployment, extending a previous date of mid-2013. The date was extended to provide “more accommodative” financial conditions, the minutes said.

The median respondent in the dealer survey saw 70 percent odds that the Fed would alter its forward guidance on the path of its benchmark interest rate at that next meeting.

Primary dealers also saw a 20 percent likelihood that the U.S. economy would be in a recession within six months, down from 25 percent odds in the December survey, according to the median response.

--Editors: James Tyson, Kevin Costelloe

To contact the reporter on this story: Caroline Salas Gage in New York at csalas1@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net


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