Economists boost expectations of more U.S. stimulus

By Chris Reese

NEW YORK (Reuters) - Economists have raised their expectations that the Federal Reserve will resort to more monetary stimulus to cushion the U.S. economy against Europe's debt crisis and boost sluggish domestic demand, a Reuters poll showed.

The median of forecasts from 49 economists polled by Reuters gave a 45 percent chance the Fed would eventually undertake another round of stimulus, or QE3.

A similar poll on May 15 ascribed only a 30 percent chance of the Fed embarking on a third round of money printing.

Economists also see just over a 40 percent likelihood in the near term of the chance of the Fed extending its so-called Operation Twist, a less controversial tool by which the central bank sells short-term debt and buys longer-dated bonds to lower borrowing costs.

The latest poll was conducted after Fed Chairman Ben Bernanke said on Thursday the U.S. central bank was ready to shield the economy if financial troubles mount, although he offered few hints that new moves were imminent.

Only hours earlier, Janet Yellen, the Fed's second-highest official, cited risks from housing problems, a weak jobs market and worsening financial conditions as she spelled out the case for the U.S. central bank to provide more economic support.

Discussion of further stimulus will be front and center at the Fed's next policy meeting June 19-20.

"Clearly we have had some signals from the (Fed) that they are more concerned about the economic situation and they are trying to determine themselves whether the economy has slowed in such a way that it would be appropriate to provide more stimulus or monetary accommodation," said Kevin Logan, economist at HSBC Securities USA in New York.