Don't Fight `Better Informed' Fed on Bond Purchases, RBS's O'Donnell Says

Investors should heed the views of the Federal Reserve on the state of the economy and the need for more debt purchases because “so far they have been right,” according to William O’Donnell of Royal Bank of Scotland Plc.

“The Fed is better informed than anybody else,” O’Donnell, a government bond strategist at the RBS Securities unit, said in a Bloomberg Television interview on “Surveillance Midday” with Tom Keene. “They see the picture; they are concerned about it, about the disinflationary trend, and obviously the pernicious nature of unemployment in this country. They are tasked to do something about it and I cheer them on.”

The unemployment rate has remained near a 26-year high for the past three months. Reports on Dec. 3 may show nonfarm payrolls rose by 145,000 in November and an unemployment rate unchanged at 9.6 percent, according to Bloomberg surveys.

The central bank announced Nov. 3 it will purchase an additional $600 billion in Treasury securities to support growth in the U.S. economy. In a statement issued in Washington that day, the Federal Open Market Committee said it “will adjust the program as needed to best foster maximum employment and price stability.” The central bank also left the target rate for overnight loans between banks at a record low range of zero to 0.25 percent, where it has been since December 2008.

“This rather vast and highly accomplished staff in Washington exceeds anything else the Street can bring,” O’Donnell said. “Go with the strength, go with the staff and go with the Fed.”

To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net; Tom Keene in New York at tkeene@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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