“(MoneyWatch) The Federal Reserve’s Open Market Committee will finish its 2012 work this week with the final policy meeting of the year; economic forecasts; and a Bernanke press conference chaser. The central bankers are likely to urge the president and lawmakers to avert the so-called “fiscal cliff,” a term now credited to Chairman Ben Bernanke himself.
Also on the agenda will be the nation’s moribund economic growth and ways the Fed may be able to help boost it through monetary policy. Analysts now believe that economic growth for the fourth quarter will sink to about 1 percent, down from the 2.7 percent annualized rate seen in the third quarter. If that were the case, total growth for 2012 would be less than 2 percent, matching 2011’s pokey rate.
At that rate and given the continued weakness in the nation’s labor market (see “November jobs report: Sandy impact muted“), the question facing the Fed is whether to extend “Operation Twist” beyond its year-end expiration. Operation Twist, which was implemented in September 2011, was a policy where each month, the Fed sold $45 billion worth of short-dated government bonds and bought an equal amount of government bonds with longer maturities. The goal was to lower long-term rates to encourage more borrowing and spending, which would in turn (hopefully) create more economic growth….”
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