Wall Street boosts QE3 expectations after May jobs shock

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Wall Street boosts QE3 expectations after May jobs shock

Reuters | June 29, 2012 | 03:44 PM EDT

NEW YORK/WASHINGTON (Reuters) - A much weaker-than-expected U.S. labor market alongside escalating financial turmoil in Europe raised Wall Street's expectations the Federal Reserve will intervene to protect the fragile U.S. economic recovery, according to a Reuters poll.

The median of forecasts from 15 primary dealers - the large financial institutions that do business directly with the Fed - showed a 50 percent chance the central bank would eventually launch another round of quantitative easing, known as QE3.

A similar poll done on May 4 resulted in the median of forecasts from 14 primary dealers giving a 33 percent chance of the Fed eventually undertaking QE3.

The latest poll was conducted on Friday after the government said employers added only 69,000 jobs to their payrolls last month, the smallest number since May of last year, and 49,000 fewer jobs were created in the prior two months than had been thought. The jobless rate also rose for the first time in nearly a year.

"We think that the odds of QE3 remain elevated and have risen somewhat on the back of today's data and the situation in Europe," said Michael Hanson, economist at Bank of America Merrill Lynch.

Weaker growth around the world and the rising risk of a full-scale financial crisis in Europe should Greece exit the euro zone threaten to deliver fresh blows to the United States.

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Source: http://www.cnbc.com/id/48018224?__source=RSS*tag*&par=RSS

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