The Federal Reserve appears on track to buy the entire $600 billion in U.S. government debt it has committed to purchase, barring a sharp, unexpected shift in the economy's prospects.
If anything, lingering weakness and renewed concerns about global credit markets may lead top officials to lean toward doing more rather than less.
The U.S. central bank's decision last week to embark on a new round of monetary easing represented a shift in direction for policymakers, who until spring had been focused on possibly unwinding emergency steps taken during the financial crisis.
As such, policymakers would not likely have committed to a significant upfront figure if they saw the possibility that they would need to change course shortly thereafter. Instead, officials view the move much like traditional interest rate cuts, which are rarely taken back so rapidly.
A recent batch of better-than-expected economic data, including a relatively upbeat reading on the job market, has raised questions about whether the Fed acted prematurely in pulling the trigger on a second round of bond buying.
Kevin Warsh, seen as one of the more hawkish members of the Fed's Washington-based board, argued last week that "policies should be altered if certain objectives are satisfied."
Adding to the uncertainty, a report from a prominent consultancy that made the rounds in markets on Thursday suggested the Fed could refrain from purchasing the full $600 billion if conditions improved significantly.
The Treasury market has been selling off sharply, in part as a response to the somewhat brighter landscape.
A HIGH BAR
But the Fed's own forecasts — and underlying economic conditions — suggest the bar is set exceedingly high for a policy reversal.
"Even if you get better growth, that's not going to be enough," said Diane Swonk, chief economist at Mesirow Financial in Chicago.
"Unless you get unemployment well below 9 percent really quickly, you're not going to have a very comfortable situation for the Fed."
That prospect, despite October's gain of 151,000 new jobs, seems, at best, distant. The central bank's own forecast sees the unemployment rate, currently stuck at 9.6 percent, coming down at a snail's pace. Its July estimates, which are likely to have been revised to show even more weakness at the November meeting, saw the jobless rate hovering around 8.3 percent to 8.7 percent through 2011.
An opinion piece by Fed Chairman Ben Bernanke in the Washington Post published a day after the Fed decision was instructive. In it, Bernanke moved away from the notion that the only purpose of easing is to fight deflation, adding that as long as the economy is operating below its potential, policy can help.
"Even absent such (deflation) risks, low and falling inflation indicate that the economy has considerable spare capacity, implying that there is scope for monetary policy to support further gains in employment without risking economic overheating," he wrote.
And the data indicate the disinflationary trend remains firmly in place, with forecasts for the October year-on-year gain in consumer prices outside food and energy centering around 0.7 percent, well below the Fed's presumed target of 2 percent or slightly less.
A Reuters poll of U.S. primary dealers taken after the government's employment report on Friday found that 9 of the 15 large banks that participated in the survey expect the program to be extended beyond $600 billion.
Whether the Fed's bond-buying policy, also known as quantitative easing or QE, will enter a third phase when the $600 billion in purchases is completed in June is another matter.
A hawkish tilt in the composition of voting members on the Federal Open Market Committee, where regional Fed bank presidents rotate in and out each year, will make consensus harder to come by in 2011.
The chorus of opposition to the policy, both internationally and domestically, could also restrain further Fed buying.
However, since the financial crisis sent the economy into its deepest recession, the Fed has shown a propensity for erring on the side of doing too much. Its influential chairman, Ben Bernanke, has argued that Japan's fatal error was being too meek in its approach to unconventional easing.
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