WASHINGTON, Sept. 13 (Xinhua) -- The U.S. Federal Reserve on Thursday announced a new round of bond buying program and extending the duration of its ultra-low interest rate, but many economists believed that those moves might fail to deliver the target of bolstering the country's weak economic recovery.
OPEN-ENDED QE3
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 (MBS) at a pace of 40 billion U.S. dollars per month to speed up the recovery of the nation's housing sector.
This was the third round of quantitative easing, also known as the QE3, which the Fed has introduced since the onset of the global financial crisis in 2008.
U.S. economic activity has continued to expand at a "moderate pace." Growth in employment has been slow, and the jobless rate remained elevated, the Fed said in a statement explaining its motivations of the new unconventional monetary policy.
"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 FOMC meeting participants.
Since the onset of the financial crisis, the Fed has completed two rounds of quantitative easing programs, dubbed as QE1 and QE2. It has bought more than 2 trillion U.S. dollars of U.S. government debt, agency MBS and other assets, expanding its balance sheet to more than 2.8 trillion dollars.
OTHER MEASURES
The Fed on Thursday also decided to keep its ultra-low federal funds rate unchanged at least through mid-2015, a half-year extension from its earlier commitment.
The U.S. central bank has kept its federal funds rate at a historically low range of zero to 0.25 percent since the end of 2008 to keep short-term borrowing cost low.
The FOMC 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 was maintaining the existing policy of reinvesting principal payments from its holdings of agency debt and agency MBS, in a bid to support housing mortgage markets.
These actions, which together will increase the FOMC'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, and help to make broader financial conditions more accommodative, noted the FOMC.
|
