Federal Reserve policy makers are signaling they favor an abrupt end to $600 billion in Treasury purchases in June, jettisoning their prior strategy of gradually pulling back on intervention in bond markets.

"I don't see a lot of gain to reverting to a tapering approach," Atlanta Fed President Dennis Lockhart told reporters yesterday. "I don't think that is necessary," Philadelphia Fed President Charles Plosser said last month.

Central bankers, who next meet March 15, are about half way through their second round of bond purchases. To bring the program to a full stop in June, they must be confident that the economy is strong enough to endure higher long-term interest rates and rising expectations of an exit from the most expansive monetary policy in Fed history, said Dan Greenhaus at Miller Tabak & Co. LLC in New York.

"If this is a self-sustaining recovery that can withstand higher interest rates, then why not get the hell out?" said Greenhaus, Miller Tabak's chief economic strategist. "Still, I am nervous about their ability to withdraw from this policy without broader disruptions."

The Fed announced in November that it would buy $600 billion of Treasuries through June in a bid to boost the recovery and reduce an unemployment rate lingering near a 26- year high. The program, known as QE2 for the second round of so- called quantitative easing, followed $1.7 trillion of asset purchases that ended in March 2010.

David Fuller's view With commodity price inflation increasing the Fed is under growing pressure to end its QE2 programme, even from people such as Warren Buffett (see interview transcript posted yesterday) who had praised Bernanke's earlier stimulative measures.

However June is nearly three months away, so Bernanke will want to keep his options open. Yes, the US economy is improving, with the stimulus at its back, but if turmoil in the Middle East catapulted oil prices higher (NYME & Brent) risks to the economy would increase.

If that crisis is avoided, another reason for the Fed to end QE2 is the soft dollar. The US Dollar Index has drifted lower as the euro has rallied. Additionally, the Asian Dollar Index and the Latin American Index are testing their range highs against the greenback. Bernanke will come under additional criticism if the US dollar's devaluation gathers momentum.