Fed agrees new stimulus for US economy

The US Federal Reserve said it would shift
$400 billion in its debt portfolio holdings to
long-term bonds
© AFP/File Karen Bleier

AFP

WASHINGTON (AFP) – The US Federal Reserve said Wednesday it would shift $400 billion in its debt portfolio holdings to longer-term bonds in hopes of cutting interest rates and stimulating more growth.

The Federal Open Market Committee meanwhile kept its key interest rate target at an ultra-low 0-0.25 percent, saying economic growth “remains slow”.

In a revival of the Fed’s 1961 “Operation Twist” bond-buying program, the central bank said it would sell short-term bonds and purchase, by the end of next June, $400 billion of Treasury securities with 6-10 year maturities.

But it would not increase its net bond purchases.

“This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative,” the FOMC said in a statement.

Three of the 10 FOMC members dissented from the move.

They “did not support additional policy accommodation at this time,” the statement said.