OPERATION TWST ENDING & THEN...

The Federal Reserve will amplify record accommodation Wednesday by announcing $45 billion in monthly Treasury buying that will push its balance sheet almost to $4 trillion, according to a Bloomberg survey of economists.

Chairman Ben S. Bernanke and his FOMC colleagues will press on with purchases at least through the first quarter of 2014, according to the median estimate in the Dec. 7-10 survey. They are expanding the balance sheet beyond $2.86 trillion in a bid to spur growth and lower an unemployment rate of 7.7 percent.
FinanceNews/Fed-easing-bond-buying

The Fed’s latest round of quantitative easing will total $1.1 trillion, with about $620 billion in mortgage-backed securities and $500 billion in Treasurys, according to the median estimate in the survey.
Operation Twist

The central bank this month is scheduled to end Operation Twist, in which it swaps $45 billion of short-term Treasurys each month for longer-term government debt. That program kept the total size of the balance sheet unchanged, while new Treasury purchases would expand it.


Tax Increases

Also weighing on the economic outlook are more than $600 billion of tax increases and spending cuts scheduled to take effect next year unless Congress acts. The Congressional Budget Office has said the fiscal tightening would probably push the economy into a recession next year.

Treasury purchases would constitute “insurance that if there’s a failure to agree between Congress and the president, the Fed is out there to prevent an even bigger downdraft,” Silvia said.