Fed Leaning Closer to New Stimulus if No Growth Seen

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A growing number of Federal Reserve officials have concluded that the central bank needs to expand its stimulus campaign unless the nation’s economy soon shows signs of improvement, including job growth.

The question is expected to dominate the agenda when the Fed’s policy-making committee meets next week, with some members pushing for immediate action while others seek to postpone a decision at least until the committee’s next meeting in September, so they can see a few more weeks of economic data. The Fed’s chairman, Ben S. Bernanke, told Congress last week that the options under consideration include a new round of asset purchases, or “quantitative easing,” often described as QE3. As part of any such program, officials increasingly favor expanding the Fed’s holdings of mortgage-backed securities for the first time since 2010.Mr. Bernanke and other Fed officials are convinced that such a step would further drive down long-term interest rates and improve the pace of economic growth, but they are concerned that the benefits would be modest while the costs are uncertain.The Fed also could take the more modest step of extending its forecast that short-term interest rates will remain near zero beyondl late 2014, although many economists regard such a step as unlikely to provide a significant jolt to growth. ... Continue to read.

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