The Federal Reserve is likely to expand its monetary stimulus to the US economy this week at the end of its two-day policy meeting.
Fed chairman Ben Bernanke and his colleagues are expected to announce a new 85 billion dollar a month bond-buying plan.
The aim is to further reduce long-term interest rates and encourage borrowing by companies and individuals.
But the bank says it won’t be able to counter the looming effects of the ‘fiscal cliff’ of tax rises and automatic spending reductions set for the end of the year.
‘Fiscal cliff’ outcome uncertain
As the pace of talks quickened to avert the ‘fiscal cliff’, senior members of the US House of Representatives of both parties cautioned that an agreement on all the outstanding issues remained uncertain.
Republicans and Democrats are not close to “finishing anything,” California Representative Kevin McCarthy, the Republican whip in the House, said.
“There’s nothing agreed to. They are just beginning to talk,” he said of House Speaker John Boehner and President Barack Obama.
Meanwhile, Representative Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee, said he thought Congress could resolve some of the issues by the Dec. 31 deadline — among them the hikes in tax rates-but might have to leave others for the new Congress that takes office in January.
The two major elements of the so-called cliff are automatic spending reductions set to occur starting Jan. 1 and tax cuts that expire at the end of the year. Democrats, including Obama, want the reduced taxes extended for all but the highest earners, while Republicans want them continued for all brackets.