The Federal Reserve’s dejected outlook for additional economic recovery in the U.S. this year is reason for concern, but officials are nonetheless pooling their efforts in hopes of boosting job growth. Still, many believe the central bank has already exhausted its chances of stimulating the economy any further this year.
On Wednesday, the Fed stated that it would be extending ‘Operation Twist’ through 2012, a program that works to lower long-term interest rates and borrowing costs for both households and businesses. The Fed also exchanges short-term securities for those that are more long-term.
According to the Wall Street Journal, the Fed’s approach to economic recovery was not received with enthusiasm.
“Investors were initially disappointed the Fed didn’t take more aggressive action Wednesday. The Dow Jones Industrial Average finished the day down 12.94 points, or 0.1%, to 12824.39, after at one point dropping by nearly 100 points.
“The first stage, $400 billion Operation Twist program had been scheduled to end this month. By extending it by six months, the Fed will be purchasing an additional $267 billion in Treasury bonds and notes with maturities ranging from six to 30 years, and selling an equivalent amount of securities with maturities of three years and less. This extension effectively expands Twist to $667 billion. By the time the program ends in December, the Fed will have almost no holdings maturing through January 2016.”
Despite the negative feedback in the face of the program, Ben Bernanke, Fed chairman, expressed his conviction to the cause.
“I wouldn’t accept the proposition though that the Fed has no more ammunition,” he said. “If we don’t see continued improvement in the labor market we’ll be prepared to take additional steps.”
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