WASHINGTON — The Federal Reserve last month absorbed a wave of criticism for announcing it will buy $600 billion in Treasury bonds to try to revitalize the economy. It won’t help, critics said.

So when Fed officials meet today, they’re likely to feel a weight has been lifted. The White House and key Republicans have agreed on a tax-cut deal that’s expected to do just what critics said the Fed’s bond purchases wouldn’t: Boost spending, spur hiring and speed economic growth.

Economists think the Fed will still carry out its full $600 billion bond-buying plan before July as scheduled. Unemployment is 9.8 percent, and the economy needs all the help it can get.

But the tax-cut plan does make the Fed less likely to buy even more than $600 billion in bonds – something Chairman Ben Bernanke said it might do if the economy needed more of a boost.

“The tax-cut plan reduces pressure on the Fed to have to buy more government securities,” said Mark Zandi, chief economist at Moody’s Analytics. “I think they are committed to $600 billion because they aren’t certain how things will turn out. It’s always possible the economy could rev up rapidly. But I think the odds are low the Fed will do less.”

Zandi and other economists think the tax cuts will help stimulate growth over the next two years. And consequently, the Fed might have to raise record-low interest rates sooner than had been expected.

That’s because stronger growth increases the risk of high inflation, which the Fed fights by raising rates to cool the economy. The tax-cut plan will also swell the government’s annual budget deficits.

Zandi and others now think the Fed will start raising rates in late 2012, compared with early 2013 without the tax-cut plan.

The Fed announced its Treasury-purchase plan at its last meeting, Nov. 3. At the time, Congress seemed unlikely to do much on its own to strengthen the economy. Bernanke felt Congress’ reluctance to approve new stimulative spending obliged the Fed to do what it could to further drive down interest rates.

But early this month, the White House and Republicans forged a broad tax-cut deal that seems likely to pass despite resistance from many Democrats.

At their meeting today, Bernanke and his colleagues will likely discuss the effect of the tax-cut deal on the Fed’s efforts to stimulate the economy. But with scant likelihood of any Fed policy changes, attention has turned instead to the tax-cut plan emerging in Congress — its benefits and its risks.

And no one is looking anymore at the Fed to rescue the economy alone.

 

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