“The Federal Reserve said it will buy $45 billion a month of Treasury securities starting in January, expanding its asset-purchase program, and for the first time linked the outlook for its main interest rate to unemployment and inflation.
“The committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor-market conditions,” the Federal Open Market Committee said today at the conclusion of a two-day meeting in Washington.
The Fed said interest rates will stay low “at least as long” as the unemployment rate remains above 6.5 percent and if inflation “between one and two years ahead” is projected to be no more than 2.5 percent. The committee “views these thresholds as consistent with its earlier date-based guidance.” The Fed dropped its earlier pledge to hold interest rates near zero “at least through mid-2015.”
Chairman Ben S. Bernanke is using his unlimited authority to buy Treasuries in an unprecedented effort to stoke growth and reduce 7.7 percent unemployment. The Fed acted in its last regular meeting of the year as lawmakers and the Obama administration continue talks to avert more than $600 billion of automatic spending cuts and tax increases that threaten to throw the country into a recession.
Stocks and Treasury yields rose after the statement. The Standard & Poor’s 500 Index climbed 0.7 percent to 1,437.67 at 1:38 p.m. in New York. The yield on the 10-year Treasury note was 1.69 percent, compared with 1.66 percent late yesterday.
‘Very Active’
“The Fed has been very active since the crisis began, and they are feeling some time pressure because the longer Americans stay unemployed, the harder it is to incorporate them back into the labor force,” said Dana Saporta, a U.S. economist at Credit Suisse Group AG in New York….”
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