Fed Announces $45B-a-Month Bond Buy

Plans to hold interest rates down until jobless rate hits 6.5%
By Kevin Spak,  Newser Staff
Posted Dec 12, 2012 12:10 PM CST

(Newser) – The Federal Reserve dropped a bombshell today, announcing that it would spend $45 billion a month on bond purchases to keep interest rates low, and that it would keep its short-term rates near zero as long as it takes to get unemployment below 6.5%. It will also keep up its current practice of spending $40 billion a month on mortgage bonds, the AP reports, bringing its total monthly spending to $85 billion, and growing its now almost $3 trillion portfolio.

story continues below

This is a "historic move" that "will change how we think about Fed policy, yet again," writes Sudeep Reddy at the Wall Street Journal. Instead of pegging its targets to specific time frames, the Fed is now tying its policies to specific economic outcomes. The policy is sometimes referred to as the "Evans rule," because Chicago Fed President Charles Evans has been pushing for it for months. The Fed is also sending a strong, loud signal that it's willing to allow inflation to rise if that's what it takes to reduce unemployment. (Read more Federal Reserve stories.)

We use cookies. By Clicking "OK" or any content on this site, you agree to allow cookies to be placed. Read more in our privacy policy.
Get the news faster.
Tap to install our app.