The Federal Reserve extended Operation Twist – a plan to sell short-term bonds while purchasing longer-term securities – to support a slowing US economic recovery, but refrained from a more aggressive plan to ease monetary policy.
At the conclusion of a two-day meeting in Washington, the Federal Open Market Committee, which sets interest rates, offered a bleaker picture of the US economy than it had at its last gathering two months ago. It noted that employment growth had slowed and consumer spending was rising at a weaker pace. It warned that global financial strains continued to pose “significant downside risks” to the economic outlook.
But, in a sign Fed officials remain divided over the seriousness of the deterioration in the economy and the effectiveness of bolder steps, they stopped short of approving a fresh expansion of the central bank’s balance sheet through new asset purchases, known as QE3.