WASHINGTON (AP) — The Federal Reserve is making a bold effort to invigorate the economy by announcing it will buy hundreds of billions more in Treasury bonds.
The Fed says it will buy $600 billion of long-term government bonds by the middle of 2011 to further drive down rates on mortgages and other debt. This will be in addition to an expected $250 billion to $300 billion in purchases over the same period from reinvesting proceeds from its mortgage portfolio.
The idea is for cheaper loans to get people to spend more and stimulate hiring. The Fed says it will review whether adjustments are needed depending on how the economy is performing.
Some worry the Fed action will do little to boost the economy because interest rates are already historically low. Others fear the bond purchases could drive inflation too high over the long term and unleash speculative buying in assets like stocks.
