Federal Reserve: Recovery Has "Slowed"
The New York Times reports that the Federal Reserve will buy new government debt, after acknowledging that the nation's economic recovery has slowed.
Acknowledging that “the pace of recovery in output and employment has slowed in recent months,” the Federal Reserve on Tuesday announced that it would use the proceeds from its huge mortgage-bond portfolio to buy long-term Treasury securities.
By buying new government debt, the Fed is taking an unmistakable step to maintain the large amount of money that it pumped into the economy, starting in 2007, to prop up the financial and housing markets.
The Fed bought $1.25 trillion in mortgage-backed securities, and another $200 billion in debts owed by government-sponsored enterprises, primarily Fannie Mae and Freddie Mac, and completed the purchases in March. The Fed had planned to allow the size of that portfolio to shrink gradually over time as the debts matured or were prepaid. Instead, the Fed will now reinvest those principal payments in longer-term Treasury securities.
The central bank said it will continue to roll over its holdings of other Treasury securities as they mature.
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