The Federal Reserve announced Wednesday that it will take unprecedented steps to bolster the economy, saying it will continue to stimulate growth until the unemployment rate falls to 6.5 percent or the inflation rate reaches 2.5 percent. The Fed said it did not expect unemployment to reach that benchmark until 2015.
It was a historic move that for the first time explicitly spells out the Fed’s goals for the nation’s economy and how it will respond to changing conditions.
The Fed says it will also begin buying $45 billion in Treasury bonds per month, on top of $40 billion per month it is already buying in mortgage bonds. The measures come as the nation braces for a possible recession if Congress and the White House do not reach a deal to avert a series of tax increases and major spending cuts set to go into effect at the end of the year.
The statement, coming after a two-day meeting of the Fed’s policy committee, amounts to a new commitment to trying to reduce unemployment. But it also shows that Fed officials remain concerned about the long-term prospects for the U.S. economy. The actions are likely to stimulate economic activity — because they suggest that the central bank will be boosting growth for at least two years — and markets jumped on the announcement. But stocks began losing gains by midafternoon, as Fed Chairman Ben S. Bernanke began his usual news conference after the Fed released its statement and economic projections. The Dow Jones industrial average was nearly flat by the end of the question-and-answer session at 3:30 p.m., and the Standard & Poor’s 500-stock index was up only 0.3 percent, dropping from a 0.7 percent high in the early afternoon.
Choosen excerpts by Job Market Monitor from
via Fed ties stimulus to jobs, inflation in unprecedented steps to bolster economy – The Washington Post.
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