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Fed action in response to US recovery risks?


Fed action in response to US recovery risks?

The weak US recovery and growing financial problems in Europe may mean the Federal Reserve decides to launch a new round of monetary stimulus today.

At their monthly meeting many economists expect the US central bank policymakers to extend a bond swap programme – known as ‘Operation Twist’ that is due to end this month.

That is aimed at pushing down longer-term interest rates in order to shield the still-fragile economy.

An extension of ‘Operation Twist,’ in which the central bank sells bonds with maturities of three years or less and buys securities with maturities of six years and longer, is seen as a less extreme step than outright purchases of new securities.