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Bond Dealers Saw Higher Odds of Fed Bond Buying in Survey

Primary dealers saw a higher probability of Federal Reserve asset purchases in a survey conducted by the central bank in July, before its most recent policy meeting.

The median respondent in the survey by the Federal Reserve Bank of New York saw a 65 percent chance the Fed would expand its balance sheet through securities purchases within one year, up from 50 percent odds in the survey conducted before the Federal Open Market Committee’s June 19-20 meeting, results released today by the New York Fed showed.

Fed officials said in an Aug. 1 statement that they will step up record stimulus if needed to spur growth and cut a jobless rate stuck above 8 percent since February 2009. Many policy makers said additional stimulus probably will be needed soon unless the economy shows signs of a durable pickup, minutes from the meeting showed yesterday in Washington.

Bond dealers in the survey pushed back their expectations for the Fed to raise its benchmark interest rate. The median among the predictions for the timing of the first increase was during the first quarter of 2015, compared with the fourth quarter of 2014 in the June survey, the results showed.

The Fed has kept its benchmark interest rate near zero since December 2008. It has also carried out two rounds of bond purchases known as quantitative easing to reduce borrowing costs.

In the first round starting in 2008, the Fed bought $1.25 trillion of mortgage-backed securities, $175 billion of federal agency debt and $300 billion of Treasuries. In the second round, announced in November 2010, the Fed bought $600 billion of Treasuries.

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