The Federal Reserve will try to push down long-term interest rates by buying $400 billion in longer-term Treasury securities and selling shorter-term ones, it said in a statement Wednesday. The Fed expects "some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually," the statement says. And, Reuters's Mark Felsenthal and Pedro da Costa explain, its decision to "reinvest proceeds from maturing mortgage and agency bonds back into the mortgage market" are an "acknowledgement of just how weak conditions in the sector have remained."
Bloomberg's Scott Lenman writes that this means Bernanke has "expanded use of unconventional monetary tools for a second straight meeting after job gains stalled and the government lowered its estimate of second- quarter growth." With the news, the yields on 10-year Treasury bonds fell to their lowest in 60 years, Reuters reports, and the Dow and S&P 500 dropped 1 percent.
The Fed wants to prevent the sluggish economy from getting worse, but, as Reuters notes, the Fed has become a "popular punching bag" for Republican presidential candidates, with Rick Perry calling Ben Bernanke "treasonous," and several candidates promising to fire him and audit the Fed at recent primary debates. Congressional Republicans have urged the Fed not to try anything else to stimulate the economy.
This article is from the archive of our partner The Wire.