Fed to Keep Easing Pace for Bernanke Term, Brown Brothers Says

The Federal Reserve will refrain from tapering its $85 billion in monthly bond purchases before the end of Chairman Ben S. Bernanke’s term in early 2014, according to Brown Brothers Harriman & Co.’s Marc Chandler.

The Federal Open Market Committee last week maintained its commitment to buying assets under the quantitative-easing stimulus strategy until there’s significant improvement in the labor market even as speculation mounted that they would trim purchases. Bernanke’s second term ends Jan. 31, 2014.

“I expect QE3 to continue all year,” Chandler, the New York-based global head of currency strategy at Brown Brothers Harriman, said in an interview on Bloomberg Radio’s “Surveillance” with Tom Keene. “Bernanke is not going to be the Federal Reserve chairman that tapers it off. It will come under the next chairman, which will help the next chairperson boost their own anti-inflation credibility.”

The dollar gained 0.5 percent to $1.3093 per euro at 10:24 a.m. in New York. The greenback appreciated 0.2 percent to 99.24 yen, after earlier weakening to 98.65 yen.

The Fed is not participating in the competitive currency devaluation process being used by other global central banks and still favors a “strong-dollar policy,” Chandler said.

“They will not use a weak dollar as a goal of policy to try to influence our partners by using the dollar as a weapon,” Chandler said. “Austerity is being forced within countries from governments, squeezing the local population instead of going after foreign wealth.”

The dollar has risen 2.5 percent this year, the best performance after the New Zealand dollar’s 4.6 percent increase, according to Bloomberg Correlation Weighted Indexes that track 10 developed-nation currencies. The worst-performing yen slipped 12 percent, while the British pound fell 2.8 percent.

Before it's here, it's on the Bloomberg Terminal.