Fed could be moving to more bond buying

English: Ben Bernanke leaving the 2008 Bilderberg Conference (Photo credit: Wikipedia)

The Federal Reserve appears to be moving toward announcing some new step to try to energize the troubled U.S. economy. The question is whether it will do so after its policy meeting this week. Probably not, many economists say.
The U.S. economy grew at an annual rate of just 1.5 percent from April through June, less than the 2 percent rate in the first quarter. But many analysts say the economy hasn't slowed enough to compel the Fed to announce further help immediately. Still, Fed officials have signaled their concern about weakening job growth and consumer spending, which have brought the economy closer to a standstill. Chairman Ben Bernanke has said the Fed is prepared to take further action if unemployment stays high.

What that action might be isn't clear. The Fed has already pursued two rounds of purchases of Treasury bonds and mortgage-backed securities to cut long-term interest rates and encourage borrowing and spending. These programs are called quantitative easing.

The Fed has also extended a program called Operation Twist. Under this program, the Fed sells short-term Treasurys and buys longer-term Treasurys.

"I think they are inching towards another round of quantitative easing, but I am not convinced they will get there at this meeting," said Paul Edelstein, director of financial economics at IHS Global Economics.... Continue to read.

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