The central bank looks certain to both extend its purchases of mortgage-backed debt and replace another expiring stimulus program with a new bout of money creation.
Policymakers are also likely to repeat a pledge to keep buying bonds until the labor market outlook improves substantially. A drop in the jobless rate to 7.7 percent in November from 7.9 percent in October was driven by workers exiting the labor force, a fact certain to disappoint the Fed.
As its last program of Treasury purchases, known as Operation Twist, draws to a close, officials look set to replace it with a fresh $45 billion per month in buying. Unlike those in Twist, which were funded by sales and redemptions of short-term debt, the new Treasury purchases will further expand the Fed’s $2.8 trillion balance sheet.
Economists also expect the central bank to continue buying $40 billion per month in mortgage-backed securities as announced in September, keeping the monthly pace of total asset purchases at $85 billion -- a figure the Fed highlighted in its last policy statement.
In addition to their bond-buying plans, Fed officials appear likely to reiterate their expectation that overnight rates will stay near rock-bottom lows until at least mid-2015.
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