US Central Bank Launches New Economic Stimulus

Posted September 13th, 2012 at 1:35 pm (UTC-5)
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The U.S. central bank launched new measures Thursday to try to stimulate the weak U.S. economy.

The Federal Reserve said it would buy $40 billion a month of securities supported by real estate loans in its latest effort to boost economic growth and spur slack hiring in the country's labor market. And, at least through the end of the year, the central bank said it plans to continue to reinvest payments made on its other holdings. Together, that would boost the agency's longer-term assets by about $85 billion a month through the end of 2012.

The Fed placed no time limit on the new purchase of securities. It said that if the country's job market “does not improve substantially,” the central bank would buy more mortgage-backed securities and other assets, as well as “employ its other policy tools” to advance the U.S. economy, the world's largest.

In addition, the Fed said it would extend the timetable to keep its key lending near zero percent from late 2014 at least through mid-2015. The central bank also said it expects that eased financing “will remain appropriate for a considerable time,” even after the U.S. economy strengthens from its current sluggish pace.

The policy makers, who met in Washington for the last two days, have been stymied in their effort to advance the U.S. economy beyond the meager 1.7 percent growth it recorded in the April-to-June period. The Fed has bought more than $2 trillion worth of U.S. Treasury bonds and home loan securities since the world financial crisis in 2008, but the country's economic growth has remained sluggish.

Fed chairman Ben Bernanke was to make a statement later on the central bank's projections for the American economy.

Bernanke last month called the slack hiring in the U.S. labor market a “grave concern.”

The U.S. government reported last week that the country's labor market added only 96,000 jobs in August, not near enough to reduce the country's unemployment count of nearly 13 million workers. The jobless rate has been above an unusually high 8 percent level for 43 straight months.

The government said Thursday the number of Americans making first-time claims for jobless benefits last week increased by 15,000 to 382,000, another sign of slow job growth.

The central bank maintains political neutrality in the U.S. But its latest stimulus lands in the final stages of country's presidential election campaign, where the state of the economy is the key issue.

Republican challenger Mitt Romney says the incumbent Democrat, President Barack Obama, has failed in his oversight of the American economy and that he would not reappoint Bernanke when his Fed chairmanship ends in early 2014. Mr. Obama has pointed to 30 months of job growth in the U.S. and says Mr. Romney would return to policies that led to the worst U.S. economic downturn since the Great Depression of the 1930's.