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U.S. growth outlook broadly unchanged: Reuters poll

By Chris Reese

NEW YORK (Reuters) - The U.S. economy is expected to grow only modestly through next year, despite the Federal Reserve's pledge to buy another $600 billion of government bonds and better signs in the job market, a Reuters poll showed.

U.S. gross domestic product (GDP) will grow at a 2.0 percent annualized rate in the current quarter, the same pace as the third quarter and unchanged from the consensus last month, according to the median forecast from almost 70 economists.

Growth is expected to accelerate to an annualized 2.2 percent in the first quarter of next year, and 2.5 percent in the second quarter of 2011, also unchanged from the last poll.

"We expect that the Fed's new large-scale asset purchase program -- dubbed QE2 -- will likely boost growth only modestly, perhaps by 0.2 percent to 0.3 percent in 2011," said Richard Berner, chief U.S. economist at Morgan Stanley.

Berner added that QE2 ought to help limit downside risks to both growth and inflation. The Fed said last week it could make further purchases beyond the middle of next year if it deems that necessary.

But unlike the majority of Wall Street dealers who expect the Fed to go beyond the $600 billion of additional quantitative easing promised over the next eight months, the consensus of a broader range of economists across the U.S. and Europe thought the Fed would stop there.

"For now we view the QE2 news as a 'one and done'," said George Goncalves, head of U.S. interest rate strategy at Nomura Securities International.

A Reuters poll conducted last week found most of the 18 U.S. primary bond dealers -- large financial institutions which do business directly with the Fed and which benefit directly from bond purchases -- do expect the Fed to expand the program.

Goldman Sachs was at the high end of expectations, calling for $2 trillion of purchases under QE2 -- more than three times what the Fed has said it will do.

All but 3 of 83 economists in the latest poll expected the Fed to maintain the fed funds rate at 0-0.25 percent until the middle of next year and medians show no hike until early 2012.

Inflation and core inflation consensus forecasts remained muted, and broadly unchanged. Core CPI is seen at 1.0 percent this year and 1.1 percent in 2011.

The latest Reuters poll was conducted after the U.S. government said employers added far more jobs in November than economists had expected.

That raised some hopes the labor market may be on the mend after shedding millions of jobs in the worst recession in over 70 years.

In the October poll, only 11 of 69 economists correctly predicted the 2.0 percent growth rate for the third quarter of this year. Most were too pessimistic.

(Polling by the Bangalore Polling Unit; additional analysis by Namrata Anchan and Ruby Cherian; editing by Ross Finley and Stephen Nisbet)

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