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Federal Reserve to pump in $600 bn for US economy

The announcement, on expected lines, came against the background of political revamp in the US and concerns of high unemployment levels.

twitter-logo PTI   Washington     Last Updated: November 6, 2010  | 11:51 IST

Unveiling yet another stimulus to rejuvenate the sagging American economy, the Federal Reserve will purchase US government bonds worth $600 billion by June next year.

The announcement, on expected lines, came early Thursday morning (IST) against the background of political revamp in the US and concerns of high unemployment levels.

Terming the economic recovery as "disappointingly slow", the Fed said it would expand the purchase of government securities to bolster growth.

The Federal Open Market Committee (FOMC), the monetary policy making body, plans to "purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, at about $75 billion per month."

Fed's latest move is generally termed as second round of Quantitative Easing (QE2) -- measures aimed at boosting the national econmic growth.

The apex bank has already bought government and mortgage securities worth about $1.7 trillion between January 2009 and March 2010.

These measures, coupled with near-zero interest rate regime, are taking place amid the fading effect of the $700-billion stimulus package that was unveiled at the height of the financial meltdown in late 2008.

"The committee will regularly review the pace of its securities purchases and the overall size of asset-purchase program in light of incoming information. It will adjust the program as needed to best foster maximum employment and price stability," Fed said on Wednesday.

In the September quarter, the American gross domestic product (GDP) expanded just two per cent, while jobless rate continues to hover near ten per cent.

In what's seen as a blow to President Barack Obama's economic strategies, his Democrats' party this week lost control of the House of Representatives to rival Republicans.

Even though the Democrats hold majority in Senate, Obama would be facing a stronger opposition in moving ahead with his administration's reforms agenda.

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