Fed holds its first policy meeting of 2011

U.S. savings bonds

TEXT OF STORY

JEREMY HOBSON: The Fed kicks off a two day meeting today in Washington. Don't expect any big moves, like an interest rate hike. But there are signs the economy is growing faster. So, some investors are asking will the Fed reevaluate its plan to buy hundreds of billions of dollars in bonds?

Here's Marketplace's David Gura.


DAVID GURA: The short answer is "no."

Joseph Gagnon is an economist at the Peterson Institute.

JOSEPH GAGNON: It's difficult for me to conceive or imagine that any economic data we've seen or could see in the next few days or have seen in the last few weeks could possibly change their mind.

He says weekly numbers about housing or unemployment don't usually change Fed policy.

Marvin Goodfriend agrees. He's a professor at Carnegie Mellon.

MARVIN GOODFRIEND: I don't think the numbers have changed enough to warrant a rethinking of the overall strategy.

Goodfriend expects the Fed will keep buying bonds, hoping to encourage investment and keep interest rates low.

GOODFRIEND: It's always good to follow through with your plans unless you have exceptionally good reasons to stop doing so.

One good reason would be inflation. He says the Fed's keeping an eye on bond markets. So far, there's been some investor nervousness.

GOODFRIEND: But not enough in my opinion to cause the Fed to stop and not follow through on its full $600 billion purchases.

According to Goodfriend, if the Fed feels like it needs to change course, it could.

GOODFRIEND:But we're nowhere near that yet.

The Fed plans to buy its last round of bonds in June.

In Washington, I'm David Gura for Marketplace.

About the author

David Gura is a reporter for Marketplace, based in the Washington, D.C. bureau.

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