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US Fed to add trillion dollars to aid economy

Video by Douglas HERBERT

Latest update : 2009-03-19

The US Federal Reserve announced it would buy up to 300 billion dollars in US Treasury bonds and boost purchases of mortgage securities by 750 billion dollars, saying it would help stabilise markets (pictured: Fed chair Ben Bernanke).

AFP - The Federal Reserve announced plans Wednesday to pump an additional trillion dollars into the financial system in an effort to lift the US economy out of its worst slump since the 1930s.
  
The Fed, at the conclusion of a two-day policy meeting, said it would buy up to 300 billion dollars in long-term US Treasury bonds over the next six months "to help improve conditions in private credit markets."
  
The central bank also said it was boosting its purchases of mortgage securities by 750 billion dollars, bringing its total to 1.25 trillion dollars this year as part of a wide-ranging effort to revive the sagging US economy.
  
The announcement was made at the end of a two-day meeting by the Federal Open Market Committee, which kept its base lending rate in a range of zero to 0.25 percent.
  
The Fed, which had been expected to keep its federal funds rate unchanged, said it "anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period."
  
The panel said that since its last meeting in January, data "indicates that the economy continues to contract" amid a deep recession that is gripping the entire world.
  
"Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending," the FOMC said.
  
"Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. US exports have slumped as a number of major trading partners have also fallen into recession."
  
The statement, echoing recent comments by Fed chairman Ben Bernanke, suggested however that a recovery is in sight.
  
"Although the near-term economic outlook is weak, the Committee anticipates that policy actions to stabilize financial markets and institutions, together with fiscal and monetary stimulus, will contribute to a gradual resumption of sustainable economic growth," the statement said.
  
"In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability."
  
The US central bank will effectively be printing massive amounts of money for these purchases to help foster recovery in the recession-mired economy, which shrank at a 6.2 percent pace in the last quarter of 2008.
  

Date created : 2009-03-18

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