Tax Cuts May Spur Economy, Limit Need to Extend Fed Purchases

President Barack Obama’s agreement to prolong Bush-era income-tax cuts may reduce pressure on the Federal Reserve to extend its $600 billion bond-purchase program while spurring U.S. economic growth.

Obama’s deal with congressional Republicans may raise gross domestic product next year by as much as half a percentage point to about 3.1 percent, said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. Tom Porcelli, a senior economist at RBC Capital Markets Corp. in New York, is raising his growth forecast for 2011 by one point, also to 3.1 percent.