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US Fed likely to launch fresh monetary stimulus

business Updated: Sep 14, 2012 01:29 IST

Reuters
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The US Federal Reserve appears set to launch a third round of unconventional monetary stimulus while signaling that a weak US economy may warrant ultra-low interest rates for at least another three years.

Not everyone believes the Fed will embark on another bond-buying spree, and plenty of doubts remain about the likely efficacy of such a move.

But Fed Chairman Ben Bernanke has made clear the central bank will not sit idly by while unemployment, currently at 8.1%, remains so far above levels consistent with a healthy economic recovery.

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Many economists are confident the Fed's policy-setting Federal Open Market Committee will deliver a third round of quantitative easing, or QE3.

"The market is firmly in the camp that the FOMC will deliver; it's just a question of how much," said Brad Bechtel, managing director at Faros Trading in Stamford, Connecticut.

Many economists see the Fed leaning toward an open-ended bond-buying programme that is conditional on the path of the economy. This could help carry the economy through the looming risks of a deeper European debt crisis.