Continued from page 1

By then, he says, the Fed will have reviewed more employment data. The effect of Europe’s debt crisis on the U.S. economy will be better known. And Congress’ plans for addressing a U.S. fiscal crisis at year’s end will be clearer. Without a budget deal, higher taxes and deep spending cuts will kick in next year.

If the Fed takes the more modest step Thursday of extending its timetable for any rate increase, many analysts think it would push its target date to mid-2015. The goal would be to lower borrowing rates by assuring investors that short-term rates will likely stay near zero even longer than previously thought.

Yet Bernanke’s remarks in Jackson Hole about unemployment were so downbeat, and his defense of Fed bond purchases so strong, that many economists suspect a bond-buying program will be unveiled Thursday.

So do investors. In part because of anticipation of a QE3, they’ve boosted the Dow Jones industrial average nearly 2 percent in September, a month that’s typically weak for stocks. On Tuesday, the Dow rose 69 points. And Treasury yields have dropped on expectations that a new Fed bond-purchase program would lower interest rates.

The concern Bernanke expressed in Jackson Hole followed a Fed policy meeting in which many officials felt more Fed action would “likely be warranted fairly soon” unless there was a “substantial and sustainable strengthening in the pace of the economic recovery,” according to minutes of the meeting.

Friday’s report that U.S. employers cut back sharply on hiring in August dimmed hopes of a strengthening job market.

If the Fed does unveil QE3, some economists think it might differ from the previous bond-buying programs. With its earlier purchases, the Fed announced a dollar amount and a time frame for the bonds it planned to buy.

This time, any new bond-purchase program might be more open-ended. Three regional Fed bank presidents — Eric Rosengren of Boston, James Bullard of St. Louis and Charles Evans of Chicago — have expressed openness to a program in which the Fed would buy bonds until the economy improved significantly and unemployment fell consistently — as long as inflation remained tame.

None of those officials now have a vote on the Fed’s policy committee. But they take part in the committee discussions that would allow them to push the idea.

Jones of DMJ Advisors says he thinks open-ended bond purchases will be discussed at this week’s policy meeting. Still, he expects the Fed to announce a more conventional bond-buying program of around $500 billion. That would be less than the $600 billion in bonds in QE2 and well below the $1.75 trillion in QE1.

In light of Bernanke’s recent comments, Jones doesn’t think the Fed wants to delay further support for the economy until the election is over. Neither does Diane Swonk, chief economist at Mesirow Financial.

“This will be an effort on the part of Fed officials to pull out as much firepower as they can,” Swonk said. “They are trying for as much shock and awe as they can muster.”