Financial pros expect further stimulus, poll finds

After the government reported last week that the economy added just 96,000 jobs in August, economists polled by Reuters said there was a 60% chance the Fed would launch another round of bond buying. Above, job seekers wait at a job fair last week in San Diego.
(Sandy Huffaker, Getty Images)

WASHINGTON — Most market participants expect the Federal Reserve to announce another round of stimulus Thursday, but nearly 6 in 10 doubt it will lower unemployment.

Those were the findings of a CNBC survey of 58 money managers, strategists and economists. The poll, released Wednesday, also found financial professionals prefer Republican Mitt Romney over President Obama in November’s election 53% to 18%.

But if they had to bet, they’d put their money on the incumbent. Asked who they expected to win, 46% of respondents said Obama and 24% said Romney, with the rest unsure.

Wall Street and Washington are watching closely as the Fed’s policymaking body, the Federal Open Market Committee, finishes a two-day meeting Thursday.

With last week’s disappointing jobs report adding to worries about the economic recovery, 9 in 10 market participants in the CNBC survey said they expected the Fed to launch another stimulative bond-buying program in the next 12 months. That’s up from 78% at the end of July and 58% in early June.

Of those thinking the Fed will act, 77% expect it to do so this week. As CNBC noted, such a high level of expectation means the Fed risks a market sell-off if it does not act.

The average size of the program predicted was $510 billion, which would be just short of the $600-billion round of so-called quantitative easing that the Fed ran from November through June.

Most respondents — 86% — believed the Fed would buy a mix of Treasury bonds and mortgage-backed securities.

Analysts have said Fed purchases of mortgage bonds would lower interest rates and provide more of an economic boost than buying Treasuries.

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