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Fed to Shift Treasury Holdings to Longer-Term Securities in Stimulus Step

http://www.bloomberg.com/news/2011-09-21/fed-to-shift-treasury-holdings-to-longer-term-securities-in-stimulus-step.html

The central bank will buy $400 billion of bonds with maturities of six to 30 years through June while selling an equal amount of debt maturing in three years or less, the Federal Open Market Committee said today in Washington after a two-day meeting. The action is intended to “put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative,” the FOMC said in a statement. The Fed will also reinvest maturing mortgage debt into mortgage-backed securities instead of Treasuries. Three officials dissented, the same as at the prior meeting in August.

Chairman Ben S. Bernanke 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. Today’s action, dubbed “Operation Twist” by economists after a similar Fed action in 1961, may lower interest rates and avoids reprising the money creation that sparked Republican criticism last year.

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