Markets expect Fed stimulus this week, but doubt impact: survey

September 12, 2012|By Jim Puzzanghera
  • Federal Reserve Chairman Ben S. Bernanke, right, greets Washington Nationals third baseman Ryan Zimmerman, left, and first baseman Adam LaRoche, center, before a baseball game against the Miami Marlins at Nationals Park Friday in Washington. Bernanke and the Fed are expected to announce another round of stimulus after a two-day meeting this week.
Federal Reserve Chairman Ben S. Bernanke, right, greets Washington Nationals… (Alex Brandon / Associated…)

WASHINGTON -- Most market participants expect the Federal Reserve to announce another round of stimulus this week, but nearly six in 10 doubt it will lower unemployment.

Those were the findings of a CNBC survey, released Wednesday, of 58 money managers, strategists and economists.

The poll also found financial markets prefer Republican Mitt Romney over President Obama in November's election 53% to 18%.

But if they had to bet, they'd put their money on the incumbent. Asked who they expected to win, 46% of respondents said Obama and 24% said Romney, with the rest unsure.

Wall Street and Washington are watching closely as the Fed's policymaking body, the Federal Open Market Committee, starts a two-day meeting on Wednesday.

With last week's disappointing jobs report adding to worries about the economic recovery, nine in 10 market participants in the CNBC survey said they expected the Fed to launch another stimulative bond-buying program in the next 12 months. That's up from 78% at the end of July and 58% in early June.

Of those thinking the Fed will act, 77% expect it do so this week.

As CNBC noted, such a high-level of expectation means the Fed risks a market sell-off if it does not act.

The average size of the program predicted was $510 billion, which would be just short of the $600-billion round of so-called quantitative easing that the Fed ran from November through June. Most respondents -- 86% -- believe the Fed will purchase a mix of Treasury bonds and mortgage-backed securities.

Analysts have said Fed purchases of mortgage bonds would lower interest rates and provide more of an economic boost than buying Treasuries.

US Unemployment Rate Chart

US Unemployment Rate data by YCharts


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