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Federal Reserve To Buy More Treasuries

  • In an unprecedented declaration, the US Federal Reserve connected the short-term rate, which it controls, with inflation and unemployment. On Wednesday the Federal Reserve announced that it would keep the short-term rate very low till the national unemployment rate, currently at 7.7% is lowered to 6.5% and the inflation rate which is currently at 2.2% goes up to about 2.5%. The Fed also promised to buy $45 billion worth long-term government bonds each month. Furthermore, the Fed is likely to stop selling the short-term Treasury notes which currently help balance its holding of government bonds. Federal Reserve Chairman Ben Bernanke said in the Fed plan to keep its key interest rate unchanged.