Federal Reserve Will Not Implement a QE3 Program, Bloomberg Survey Shows

The Federal Reserve will refrain from initiating a new round of stimulus upon the conclusion of its $600 billion bond-buying program this month, according to a survey of foreign-exchange professionals.

About 65 percent of the respondents at the Bloomberg FX Summit in London last week predicted the Fed’s second round of so-called quantitative easing will be its last, the survey showed. Thirty-nine percent anticipate the end of QE2 will affect inflation, with half expecting no effect, according to the results.

Fed policy makers have tried to spur growth by holding the main interest rate near zero since December 2008 and expanding the Fed’s balance sheet to $2.79 trillion. Fed Bank of Dallas President Richard Fisher yesterday repeated his view that the central bank has done enough to support the U.S. economy and indicated he won’t support a third round of quantitative easing.

“Most people thought there was traction in the economic growth that we’re seeing and while that might slow temporarily, we still have enough to continue to grow from where we are right now,” Tod Van Name, Bloomberg’s global business manager for foreign exchange and economics, said in an interview.

Employers added a less-than-projected 54,000 jobs last month, and the U.S. jobless rate unexpectedly climbed to 9.1 percent from 9 percent in April, Labor Department figures showed on June 3. The economy grew at a 1.8 percent annual rate in the first quarter and is forecast to expand 2.5 percent for the year, based on the median estimate of economists surveyed by Bloomberg News.

‘Reserve Currency’

More than two-thirds of FX Summit respondents predicted China’s yuan will be a “reserve currency in the future,” with 32 percent saying it will happen in five to 10 years and 26 percent expecting it to require more than a decade, according to the results.

“They’re slowly seeing that the acceptance of the markets for trading renminbi offshore was quite strong and can be quite orderly,” said Van Name. “Maybe five years or 10 years is not so unrealistic.”

In a separate question, 46 percent of respondents said the cost of increased foreign-exchange regulation would be greater than the benefits provided, the survey showed.

To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net.

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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