Fed Reserve unveils steps to aid economy
by Martin Crutsinger
Associated Press Writer
September 14, 2012 12:00 AM | 476 views | 0 0 comments | 3 3 recommendations | email to a friend | print
WASHINGTON — The Federal Reserve unleashed a series of bold and open-ended steps Thursday designed to stimulate the economy by boosting the stock market and making it cheaper for people to borrow and spend.

The Fed said it will spend $40 billion a month to buy mortgage bonds for as long as it deems necessary to make home buying more affordable. It plans to keep short-term interest rates at record lows through mid-2015 — six months longer than previously planned. And it’s ready to try other stimulative measures if hiring doesn’t pick up.

“The idea is to quicken the recovery,” Fed Chairman Ben Bernanke said at a news conference Thursday. But he made clear he thinks the economy will need the Fed’s intervention even after the recovery strengthens.

Stock prices rose steadily after the Fed’s announcement. The Dow Jones industrial average climbed more than 200 points by midafternoon Eastern time.

The Fed’s policy committee announced the aggressive actions after a two-day meeting. Its moves pointed to how sluggish the U.S. and global economies remain more than three years after the recession ended.

The actions come a week after the European Central Bank announced its most ambitious plan yet to ease Europe’s financial crisis by buying unlimited amounts of government bonds to help countries manage their debts.

With less than eight weeks left until Election Day, the economy remains the top issue on most voters’ minds. Many Republicans have been critical of the Fed’s continued efforts to drive interest rates lower, saying they fear it could ignite inflation.

Asked at his news conference whether the Fed considered the impact of its actions on the presidential election, Bernanke said: “We make our decisions based entirely on the state of the economy... We just don’t take those factors into account.”

The Fed on Thursday also lowered its outlook for economic growth this year, though it’s more optimistic about the next two years. It expects growth to be no stronger than 2 percent this year. That’s down from its forecast of 2.4 percent in June.

It still thinks the unemployment rate won’t fall below 8 percent this year. The rate is now 8.1 percent. It estimates it will fall as low as 7.6 percent next year and 6.7 percent in 2014. It also expects inflation to remain at or below 2 percent for three years.
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