Wednesday, June 27, 2012

Fed to Extend Operation Twist Program

Fed to Extend Operation Twist Program

The Federal Reserve announced it will extend its Operation Twist program to the end of the year, pushing down long-term interest rates in another effort to spur home purchases and business investments.

The program, which began last September, was set to expire this month. It involves the Fed buying up long-term Treasuries and selling them as short-term bonds. The Fed said it will transfer another $267 billion over the next six months to longer-term notes to try to push down rates.

“We are prepared to do what is necessary,” Fed Chairman Ben Bernanke said. “We are prepared to provide support for the economy.”

The Fed said even though the Great Recession ended three years ago, the economy and job market will take longer than expected to recover. The Fed said it expected for unemployment to remain around 7.5 percent to 8 percent by the end of 2013.

Some analysts are skeptical that the Fed’s latest move will spur any more jump-start to the housing market. Anthony Valeri, a strategist for LPL Financial, told USA Today that the ailing job market will continue to hamper the housing market’s recovery, as well as discourage consumers from borrowing and banks from lending.

USA Today Full Story

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