U.S. GDP Grew 3.1% in Q3; Gov't Spending Made First Contribution in 3 Years

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Go back to U.S. GDP Grew 3.1% in Q3; Gov't Spending Made First Contribution in 3 Years

Fed Shifts Twist Into Outright Treasury Purchases, Sets Targets Based on Economy

December 12, 2012 12:57 PM EST

The Federal Reserve gave the market what it wanted Wednesday after shifting the expiring operation-twist program into outright treasury purchases and setting a target - based on the unemployment rate - on how long it will keep rates "exceptionally low."

First, the Fed said it will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. As a change, the Fed said it also will purchase longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year, initially at a pace of $45 billion per month.

The other major move by the FOCM was to place a target on the unemployment rate. The Fed said it will keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent.

The Full Release (Changes Highlighted):

Information received since the Federal Open Market Committee met in October suggests that economic activity and employment have continued to expand at a moderate pace in recent months, apart from weather-related disruptions. Although the... More