Fed: Let's Twist Again
Fed: Let's Twist Again
News: 2012-06-20 16:41:00 UTC+00

Fed: Let's Twist Again

Faced with a fragile economic recovery that may be losing steam, the Federal Reserve on Wednesday extended its Operation Twist bond swapping program was set to expire at the end of this month.

In an effort to thaw credit markets and keep real interest rates low, the Fed will continue to sell billions in short-term bonds and use the funds to buy longer-term securities investments through 2012.

Specifically, the Committee intends to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less.

The central bank kept its benchmark interest rate at effectively zero, and repeated its view that economic slack will probably warrant "exceptionally low" interest rates through at least late 2014.

Inflation remains in check for now, according to the Fed's statement accompanying its interest rate decision.

However, concerns about longer-term price stability kept the Fed from offering further stimulus despite lingering weakness in the U.S. housing and jobs markets.

"Information received since the Federal Open Market Committee met in April suggests that the economy has been expanding moderately this year," the Fed said. "However, growth in employment has slowed in recent months, and the unemployment rate remains elevated."

The Fed also detected a decline in the pace of increases in household spending.

The Fed will clarify its expectations for economic growth and inflation when it publicizes projections at 2 pm ET.

Published: 2012-06-20 16:41:00 UTC+00 11 months, 4 weeks, 1 day, 46 min. ago
 
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