Fed signals abrupt end to bond buying

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Bloomberg News / March 7, 2011


WASHINGTON — Federal Reserve policy makers are signaling that they favor an abrupt end to $600 billion in Treasury purchases in June, jettisoning their prior strategy of gradually pulling back on intervention in bond markets.


“I don’t see a lot of gain to reverting to a tapering approach,’’ Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said on Thursday. Lockhart’s remarks echoes Charles Plosser, president of the Federal Reserve Bank of Philadelphia, who said last month, “I don’t think that is necessary.’’

Central bankers, who next meet March 15, are about halfway through their second round of bond purchases. To bring the program to a full stop in June, they must be confident that the economy is strong enough to endure higher long-term interest rates and rising expectations of an exit from the most expansive monetary policy in Fed history, said Dan Greenhaus, chief economic strategist at Miller Tabak in New York.

“If this is a self-sustaining recovery that can withstand higher interest rates, then why not get . . . out?’’ Greenhaus said. “Still, I am nervous about their ability to withdraw from this policy without broader disruptions.’’

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http://www.boston.com/business/markets/articles/2011/03/07/fed_signals_end_to_bond_buying/