The Federal Reserve laid out a serious quantitative easing program Thursday, including $40 billion in mortgage security purchases a month, and Bank of America economists took the central bank at its word.
"This is the Fed engaging all their major policy tools to support a stronger recovery in the labor market," BofA economists Michael Hanson and Ethan Harris write in a note to clients obtained by Business Insider.
Indeed, the Fed expressed serious concern about unemployment, now 8.1 percent, with Chairman Ben Bernanke saying in his press conference, “We’re looking for ongoing, sustained improvement in the labor market.”
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Thus the Fed will keep easing until it gets that improvement.
“Left unstated was what exactly that means for policy,” Hanson and Harris say. “In our view, that likely translates to a decline in the unemployment to 7 percent if not below ….”
That, in turn, means the Fed would be in accommodation mode for a long time, they maintain. “Under our forecast, these easing steps are likely to remain in place through 2014, if not beyond. … We continue to expect further policy innovations from the Fed.”
Other economists also were impressed by the central bank’s move.
“This is definitely a significant shift in [Federal Open Market Committee] policy,” Julia Coronado, chief U.S. economist for BNP Paribas and a former Fed economist, tells Bloomberg. “This is a very aggressive commitment to success on its mandates.”
Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did
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