U.S. Federal Reserve announces new stimulus moves to boost growth

Posted on September 13, 2012

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WASHINGTON, Sept. 13 (Xinhua) — The U.S. Federal Reserve on Thursday announced a new round of bond buying and extended the duration of its ultra-low short-term interest rate till mid-2015, in a bid to bolster the country’s anemic economic recovery.

After a two-day policy meeting of the Federal Open Market Committee (FOMC), the Fed’s powerful interest rate setting panel, the U.S. central bank unveiled an open-ended bond-buying plan — to purchase agency mortgage-backed securities at a pace of 40 billion U.S. dollars per month.

This is the third round of quantitative easing, also known as the QE3, the Fed has introduced since the onset of the global financial crisis in 2008.

The Fed also decided to keep its ultra-low federal funds rate unchanged at least through mid-2015, a half-year extension from its earlier commitment.

Information received since the previous FOMC meeting in August suggested that U.S. economic activity has continued to expand at a “moderate pace.” Growth in employment has been slow, and the jobless rate remains elevated, the Fed said in a statement.

The current weak U.S. economic growth could not support any ” significant progress” in reducing the high unemployment rate, which has become a grave concern, Fed Chairman Ben Bernanke said on Thursday at a press conference after the FOMC meeting.

“Household spending has continued to advance, but growth in business fixed investment appears to have slowed. The housing sector has shown some further signs of improvement, albeit from a depressed level,” noted the Fed statement.

“The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook,” said the FOMC meeting participants.

The Committee also would continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining the existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities, according to the statement.

“These actions, which together will increase the Committee’s holdings of longer-term securities by about 85 billion dollars each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative,” the statement added.

The central bank on Thursday lowered its projection for the U.S. economic growth outlook this year to a range between 1.7 percent and 2 percent from a June forecast of between 1.9 percent and 2.4 percent.
Editor: Mu Xuequan

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