Federal Reserve policymakers may be divided over when to rein in their aggressive efforts to lower interest rates and stimulate the economy by buying $85 billion in government bonds each month.
But there's less dissent among top U.S. economists surveyed by USA TODAY: A clear majority say the Fed will continue the bond-buying into next year.
Sixty percent predict the Fed will keep buying long-term Treasury bonds until after Jan. 1, 2014, and 58% say the same about the Fed's monthly purchases of mortgage-backed securities.
Each month, the Fed is buying $45 billion in Treasuries and $40 billion in mortgage bonds. Almost two-thirds of the economists say policymakers will maintain the same amount of purchases this year.
"They're going to lean this way until they see the labor market improve" significantly, ITG chief economist Steve Blitz said.
In official statements, the Fed has said the purchases would continue until the job market improves "substantially."
But at the December meeting, Fed members appeared split on the timetable, according to meeting minutes. "A few" members said the purchases should be stopped by year's end, "several others" thought they should stop or be slowed well before the end of 2013 and one said additional buying was unnecessary altogether.
The release of the minutes on Jan. 3 pushed up yields slightly on the 10-year Treasury note as investors grew concerned about an early scaleback of the program. Fed officials' intentions could become clearer when the minutes of their Jan. 29-30 meeting are released today .
By buying bonds, the Fed is trying to drive up their prices and lower their yields. That theoretically lowers interest rates broadly and sparks purchases of homes, cars and factory gear, and it pushes investors into stocks and other riskier assets. The Fed plan has been credited with fueling the stock market rally, which makes consumers feel wealthier and spend more.
Chicago Fed chief Charles Evans has said job growth of 200,000 a month for about six months could be the kind of payroll gains the Fed is seeking before it scales back the purchases. Monthly job additions have averaged 177,000 the past six months.
But economists in the USA TODAY survey expect job growth to slow the first half of the year amid a recent increase in payroll taxes and anticipated federal budget cutbacks.
The economy, meanwhile, contracted slightly in the fourth quarter on defense cutbacks and slower business stockpiling.
"I think the economy is sufficiently sluggish that (the Fed) can continue these purchases," says Sean Snaith, director of the University of Central Florida's Institute of Economic Competitiveness.
Evans told CNBC this month that the bond buying likely would continue another six months to a year.
Other Fed members say the purchases have pushed the Fed's bond portfolio past $3 trillion, and that will make it more difficult to sell the assets rapidly enough to head off eventual inflation.
Kansas City Fed chief Esther George said last month that selling the mortgage assets "could be potentially disruptive to markets." She was the lone dissenter to the bond purchases at the Fed's January meeting.
Mike Englund, chief economist of Action Economics, says the Fed likely will strike a balance by roughly halving the size of the bond purchases starting in mid-2013. "They're trying to find some middle ground," he says.
Evans told CNBC that it makes more sense to gradually taper down the bond purchases than to end them abruptly. The latter strategy could sharply push up yields.
Other economists say the Fed could forge a compromise in other ways. Richard Moody, chief economist of Regions Economics, predicts policymakers will stop buying Treasuries toward the end of 2013 but keep buying mortgage-backed securities to make a more direct impact on the all-important housing market.
Mark Zandi, chief economist of Moody's Analytics, says the Fed will do the opposite and stop the mortgage bond purchases by Aug. 1 to avoid disrupting the market by depleting their supply.
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