Thursday
December 14, 2017
Wednesday, December 12, 2012

Fed ramps up stimulus in new approach to support growth

The Federal Reserve ramped up its stimulus to the economy yesterday, expressing disappointment with the pace of recovery in employment as contentious US budget talks heighten uncertainty about the outlook.

The central bank replaced a more modest stimulus program due to expire at year-end with a fresh round of Treasury purchases that will increase its balance sheet. It committed to monthly purchases of US$45 billion in Treasuries on top of the US$40 billion per month in mortgage-backed bonds it started buying in September.

In a surprise move, the Fed also adopted numerical thresholds for policy, a step that had not been expected until early next year. In particular, the Fed said it will likely keep official rates near zero for as long as unemployment remains above 6.5 percent, inflation between one and two years ahead is projected to be no more than 2.5 percent, and long-term inflation expectations remain contained.

The Fed noted unemployment remains elevated and that inflation is running somewhat below policymakers' 2 percent objective.

"The Committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions," the Fed said in a statement.

Policymakers also repeated a pledge to keep buying bonds until the labor market outlook improves substantially. A drop in the jobless rate to 7.7 percent in November from 7.9 percent in October was driven by workers exiting the labor force, and therefore did not come close to satisfying that condition.

Under the "Operation Twist" program that will expire at the end of the month, the Fed was buying $45 billion in longer-term Treasuries with proceeds from the sale of short-term debt. The new round of government bond-buying it announced on Wednesday will be funded by essentially creating new money, further expanding the Fed's $2.8 trillion balance sheet.

 

  • CommentComment
  • Increase font size Decrease font sizeSize
  • Email article
    email
  • Print
    Print
  • Share
    1. Vote
    2. Not interesting Little interesting Interesting Very interesting Indispensable
Tags:  Fed  stimulus  Bernanke  US  economy  





  • Comment
  • Increase font size Decrease font size
  • mail
  • Print

COMMENTS >

Comment




    ámbito financiero    ambito.com    Docsalud    AlRugby.com    

Edition No. 5055 - This publication is a property of NEFIR S.A. -RNPI Nº 5343955 - Issn 1852 - 9224 - Te. 4349-1500 - San Juan 141 , (C1063ACY) CABA - Director Perdiodístico: Ricardo Daloia