As widely expected by the market, the Federal Reserve
at the conclusion of their FOMC meeting that they will purchase
longer-term treasury securities to replace "Operation Twist".
Initially the purchases will be about $45 billion per month.
Operation Twist-which involves buying longer-term bonds and
selling a like amount of shorter-term treasuries-is expiring at
the end of this month.
Additionally, Fed buys 40 billion of agency mortgage-backed
securities each month, under QE3. In all, Fed will continue to
buy about $85 billion of longer-term bonds each month under the
Per their statement "
these actions should maintain downward pressure on
longer-term interest rates, support mortgage markets, and help to
make broader financial conditions more accommodative
Another important announcement in the release was the adoption
of "economic targets" for unemployment and inflation. They
decided to keep the target range for the fed funds rate between
0% and 0.25%-- as long as the unemployment rate remains above
6.5% and medium-term inflation does not exceed 2.5%
The action was supported by 11 members of FOMC, with dissent
from Richmond Fed President Lacker.
Later today, Fed chairman Bernanke will hold a press
conference and the central bank will also release its latest
In a recent WSJ
, some economists said that the Fed should stop buying bonds as
their acquisition is disrupting market dynamics. Do you
Further, interest rates are already near all-time lows but the
credit standards are still tight. So, do the consumers benefit
from Fed moves?
And the businesses have put their spending and hiring plans on
hold in view of the fiscal cliff uncertainty.
Do you think that the Fed move is positive for the
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