Fed likely to stimulate Q4

The Federal Reserve is likely to increase monetary stimulus, including an expansion of its balance sheet, according to Pacific Investment Management Co., which oversees the world’s largest bond fund.



Growth in the U.S. will be constrained next year amid an “unprecedented amount” of fiscal contraction, Scott Mather, Pimco’s head of global portfolio management, said at a briefing today in Sydney. The Fed will start by changing its language before taking steps to bolster the economy including efforts to stabilize the housing market, he said.


“You’ll see the language change first and then probably some of these other things,” Mather said. “They’re not done. They’ve told us that there’s more that they’re thinking about, that they can and will do.”


Fed Vice Chairman Janet Yellen said Oct. 21 that a third round of large-scale securities purchases might become warranted to boost an economy challenged by an unemployment rate of 9.1 percent and financial turmoil.