The US Federal Reserve will add further fiscal stimulus tonight (monetary policy decision due at 6.30 pm CET) by announcing $45 bn in monthly Treasury buying that will push its balance sheet almost to $4 trillion in a bid to spur growth and lower an unemployment rate of 7.7%, according to a Bloomberg poll conducted 7-10 December. 48 of the 49 economists who provided estimates expect the Treasury purchases in addition to the existing programme of $40 bn a month of mortgage-backed securities. Fed chairman Ben Bernanke, who is set to hold a press conference at 8.15 pm, and his Federal Open Market Committee colleagues will press on with purchases at least through Q1 2014, according to the survey.
Fed purchases of mortgage bonds have helped revive the US housing market by pushing down the rate on a 30-year, fixed-rate mortgage last month to a record 3.31%. The central bank this month is scheduled to end Operation Twist, in which it swaps $45 bn of short-term Treasuries each month for longer-term government debt. In the first round of quantitative easing (Nov. 2008), the central bank purchased $1.25 trillion of mortgage-backed securities, $175 bn of federal agency debt and $300 bn of Treasuries. In the second QE round (announced two years later) the Fed bought $600 bn of Treasuries.