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Bank of America’s Harris Says FOMC Statement Shows No Exit Yet

May 01, 2013

The Federal Reserve’s statement today reinforces that the central bank will continue buying assets to spur economic growth, said Ethan Harris, co-head of global economics research at Bank of America Corp. in New York.

“This is their first step towards pivoting away from this idea that the Fed is going to exit from quantitative easing,” Harris said, speaking with Tom Keene on a “Bloomberg Surveillance” television special focusing on the Federal Open Market Committee’s monetary policy statement today. “The Fed’s acknowledging that there’s actually a chance that they could increase their purchases as well as cut them.”

The FOMC said fiscal policy is restraining economic growth and that it is “prepared to increase or reduce” asset purchases to spur the economy in a statement after the conclusion of its two-day meeting in Washington.

The Fed began purchasing $40 billion a month of mortgage- backed securities in September and announced in December additional purchases of $45 billion a month of Treasury securities.

The committee reiterated its pledge to keep buying bonds until the labor market improves, while saying it could change the pace of purchases to maintain “appropriate policy accommodation as the outlook for the labor market or inflation changes.”

The Labor Department on May 3 will report the unemployment rate remained at 7.6 percent in April as employers added 145,000 jobs, according to the median estimates of economists surveyed by Bloomberg.

Budget Cuts

The U.S. Congress allowed automatic, across-the-board cuts to planned federal spending to take effect March 1. The so- called sequestration could shave 0.2 to 0.3 percentage point from gross domestic product this year, said Adam Posen, president of the Peterson Institute for International Economics and a former member of the Bank of England’s rate-setting Monetary Policy Committee.

“It’s showing up right now, it’s showing up in goods and services and jobs,” said Posen, also speaking with Keene. “It’s reasonable for the Fed to look past it, I hope, to what happens in the second half of the year.”

To contact the reporter on this story: Jeanna Smialek in Washington at

To contact the editor responsible for this story: Chris Wellisz at

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