Fed to Consider Bond Policy Shift

When dealing with economic policy, perception is reality. Federal Reserve officials will consider a symbolically important change in the management of their securities portfolio when they meet next week. The change comes on the heels of an economy that seems to be losing momentum, the Wall Street Journal reports.

The issue, according to the paper: Whether to use cash the Fed receives when its mortgage-bond holdings mature to buy new mortgage or Treasury bonds, instead of allowing its portfolio to shrink gradually, as it is expected to do in the months ahead.

The Journal speculates that any change would signal deepening concern about the economic outlook. If the Fed’s forecast deteriorates significantly, it could also be a precursor to bigger efforts to pump money into the economy.