The Federal Reserve isn’t likely to add to its planned purchase of $600 billion in Treasury bills, but don’t expect the monetary authority to raise rates soon, says Goldman Sachs’ top economist.
The Fed is likely to keep money at or near zero until 2013, says Jan Hatzius, chief U.S. economist for Goldman.
“As we’ve gotten more optimistic about growth, we’ve taken down the QE2 expectations. We don’t think that, beyond the $600 billion that has been announced, they will add additional money,” Hatzius told CNBC.
"In terms of the level of interest rates, we still think that they will basically be at zero in 2011 and probably in 2012 as well," he said.
Hatzius isn't convinced that inflation is a serious risk as long as unemployment stays high. That means stocks are likely on solid ground, even if the economy itself drags along.
Some economists see the jobless rate rising to 10 percent before long, even if new jobs appear. It stands now at 9.8 percent and could rise as longer-term unemployed re-enter the workforce, overwhelming whatever new jobs are created.
Nevertheless, the economy is obliging an increasingly rosy outlook from Goldman. New orders to U.S. factories popped higher, posting their largest gain in eight months.
The Commerce Department reports that orders for manufactured goods increased 0.7 percent in November. It had dropped by a revised 0.7 percent in October.
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