1:03 PM » When Fed Trims Bond Purchases, How Remains Undecided
Federal Reserve officials face a tough call when they gather today and Wednesday on whether to pull back on an $85 billion bond-buying program. And if they do decide to start winding down the program, they face a second tough call on whether to reduce their purchases of Treasurys, mortgage-backed securities or both. The Fed is buying $45 billion per month of Treasurys and $40 billion per month of mortgage bonds. Some Wall Street economists are convinced the Fed will pull back on Treasurys first and keep buying mortgage-backed securities at their current pace. "Fed leadership probably views MBS purchases as more effective in boosting economic activity than Treasury purchases," Goldman Sachs economist Jan Hatzius said in a note to clients last week. Mr. Hatzius predicts a $10 billion reduction in monthly purchases, also known as quantitative easing, or QE, at the Fed meeting.