The US Federal Reserve has expanded the scope of its quantitative easing programme and suggested interest rates will not rise until US unemployment falls below 6.5%.
The central bank signalled yesterday it will keep rates anchored for as long as the unemployment rate remains above 6.5% - providing it does not expect inflation to exceed 2.5% over the subsequent 1-2 years. That guidance was accompanied by an extension of its bond-buying programme. In addition to maintaining a $40bn per month programme of mortgage-backed securities purchases, the Fed will replace the expiring 'Operation Twist' with an additional $45bn per month of US treasury purchases. Operation Twist had seen the Fed sell short-dated bonds and buy longer-dated debt in an effort to ...
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