September 22nd, 2011 by admin
The U.S. Federal Reserve, which is running out of options, is now thinking to give a boost to the country’s economy and reduce unemployment.
The Fed is now expected to announce money shifting in its $1.7 trillion portfolio out of short-term securities and into longer-term holdings.
Fed Chairman Ben Bernanke is expected to advocate the move despite criticism from within the Fed and from Republican lawmakers and presidential candidates.
On Monday, the four highest-ranking Republicans in Congress sent Bernanke a letter cautioning the Fed against taking further steps to lower interest rates. Their letter suggested that lower rates could escalate the risk of high inflation.
The plan the Fed is considered most likely to unveil Wednesday has been dubbed “Operation Twist” and dates to the early 1960s. The Fed used a similar program then to “twist” long-term rates lower relative to short-term rates.
Most economists now say the odds of another recession are about one in three.