Stage set for next round of inducement

New York: The Federal Reserve is likely to start a fresh round of "unorthodox" stimulus tomorrow by announcing a plan to buy at least $500 billion (Dh1.83 trillion) in long-term securities, economists surveyed by Bloomberg News said.

A policymakers' meeting today and tomorrow was expected to restart a programme of securities purchases to spur growth, cut unemployment and increase inflation, said 53 of the 56 economists surveyed last week.

A total of 29 estimated the Fed would pledge to buy $500 billion or more, while seven predicted $50 billion to $100 billion in monthly purchases without a specified total.

The remainder predicted the Fed would buy up to $500 billion, or didn't quantify their forecast. The responses reflected differences among Fed officials over the total amount of purchases needed to bolster the recovery. Policymakers have cut the benchmark rate almost to zero and bought $1.7 trillion in securities, without generating growth fast enough to bring down unemployment from near a 26-year high.

Silver bullet

"There's no silver bullet right now," said John Silvia, chief economist at Wells Fargo Securities in Charlotte, North Carolina.

He predicted $500 billion in Treasury and mortgage-backed securities purchases in the next six months.

Disagreements among policymakers over whether to expand the balance sheet or stage a "shock-and-awe" programme of asset purchases has created confusion among investors over the size and duration of a new easing, said Ward McCarthy from Jefferies and Company in New York.