Fed Lays Ground for More Large-Scale Asset Purchases

Federal Reserve officials are probably engineering a third round of large-scale asset purchases, while they are unlikely to announce a decision today, according to economists in a Bloomberg News survey. Sixty-nine percent of those surveyed say Chairman Ben S. Bernankewill embark on a third round of quantitative easing, or QE3, with a plurality of 36 percent predicting the move in the first quarter of next year, according to the poll of 42 economists from Oct. 26-31. “We are becoming increasingly persuaded that QE3 is coming, this time focused on purchases of mortgage-backed securities,” said Dana Saporta, U.S. economist at Credit Suisse in New York. “The best guess is at this meeting they’ll try to build some consensus around the idea and lay the groundwork for eventual purchases.” “If there’s a blow-up in Europe, that would be the impetus the Fed needs to move,” said Ellen Zentner, senior U.S. economist at Nomura Securities in New York, in a phone interview. Action would probably be targeted to the housing market, she said. “The Fed has known that housing is the root of all evil for the economy, and we’re finally getting acknowledgment of that” she said, with the Obama administration’s announcement last month it would expand the Home Affordable Refinance Program. The so-called HARP aims at helping homeowners with Fannie Mae or Freddie Mac mortgages and little or no equity in their properties.

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