The Federal Reserve has propped up the US economy several times since the financial crisis struck, but many on Wall Street think the approach of November's elections may make it hesitate to do it again. Investors are weighing up the chances of more stimulus after recent signs the recovery is flagging. Chairman Ben Bernanke has said the Fed would take action if needed.
Still, with elections six months away and the Fed a regular target of conservative candidates, some economists think the central bank could be influenced by political considerations. The Fed has over time established an arms-length relationship with incumbent administrations to insulate itself from short-term political pressures.
To be sure, most reckon the Fed would respond quickly to a new emergency such as a sharp deterioration of Europe's debt crisis. The question is whether it would hesitate in the face of a less dramatic problem, such as a weakening labour market.
After two rounds of bond buying, the Fed has bought a total of $2.3 trillion of Treasuries and mortgage-backed securities to help keep interest rates low and encourage economic activity.
"The consensus seems to be pretty divided on this," said Aneta Markowska, economist at Societe Generale. "Our take is if they do something, they have to do it relatively quickly. We would need to see a more meaningful deceleration in activity for them to initiate something the closer we get to the election."
Brett Ryan, economist at Deutsche Bank, dismisses such talk, saying the Fed will stringently adhere to its dual mandate. "The trajectory of the labour market and inflation will tip the balance in its decision making, regardless of timing around a presidential election," he said.
A Reuters poll of the large financial institutions that do business directly with the Fed showed how split market experts are about any election effect.
Eight of 15 economists at primary dealers said the central bank would not be at all swayed by worries about politics if it came to undertaking more stimulus.
But economists at seven others said the Fed might hold off on another round of debt purchases even if the economy continues to have sub-par growth and unemployment remains high.
There are a total of 21 US primary dealers. The Fed has four more policy meetings before November. Some economists see the window of opportunity for more stimulus narrowing after the next gathering, June 19-20.
"That is the perception on Wall Street, that the window for action closes with the June meeting," said Michael Feroli, chief US economist, at J. P Morgan.
The Fed's current stimulus program, "Operation Twist," extends the maturity of the Fed's securities holdings to lower long-term interest rates such as those on mortgages. It is due to last through June.
"If the outlook worsens sufficiently ... I don't think politics would keep the Fed from easing," said Benjamin Reitzes, senior economist at BMO Capital Markets. "However, if the decision to ease is a marginal one, the fact that it's an election year could keep them sidelined a little longer than otherwise," he said.