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US Central Bank to Pump $600 Billion into Economy

   VOA News 03 November 2010
   Unemployed  people use computers and telephones to search for jobs and
   seek  out  unemployment  insurance  benefits  at the Nevada JobConnect
   Career Center in Las Vegas (Sep 2010 file photo)

Photo: AP

   Unemployed  people use computers and telephones to search for jobs and
   seek  out  unemployment  insurance  benefits  at the Nevada JobConnect
   Career Center in Las Vegas (Sep 2010 file photo)

   The  U.S. central bank says it will pump another $600 billion into the
   American  marketplace  in  hopes  of  boosting  the  nation's sluggish
   economy.
   The  Federal  Reserve  said Wednesday it will buy about $75 billion of
   government  securities  each  month  from  now through June 2011.  It
   called this an effort to cut the nation's high unemployment rate - now
   nearly one of every 10 workers - and to keep interest rates low for an
   "extended period."
   In  addition,  the  central  bank  said  it  will reinvest proceeds of
   mortgage   payments   it   is  receiving  from  earlier  purchases  of
   securities.   Along  with  the new stimulus, that is expected to push
   the  total  economic  boost to somewhere between $850 billion and $900
   billion.
   The  policy,  called  "quantitative  easing," was advocated by Federal
   Reserve  chairman Ben Bernanke.  Its goal is to put downward pressure
   on  long-term  interest rates paid by businesses and consumers, and to
   prime the U.S. economy for sustained growth.
   Such  an  infusion  of money into the economy could make it easier for
   consumers  to  increase  spending,  and  for  businesses  to hire more
   workers.   But critics say the plan might not have much effect on the
   economy and might generate another economic ill, higher inflation.
   The  Federal  Reserve's action came a day after opposition Republicans
   reclaimed  control  of the U.S. House of Representatives from majority
   Democrats,  and  gained  ground in the Senate.  With President Barack
   Obama,  a  Democrat,  now  sharing political power in Washington, some
   economists  are  predicting  further gridlock.  The two parties often
   are at odds on government spending and economic priorities.
   In  the aftermath of the election, Mr. Obama and victorious Republican
   leaders  pledged to work together to try to cure the nation's economic
   plight.
   Even  so,  the central bank's position on boosting the world's biggest
   economy took on added importance.
   Interest rates paid by businesses and consumers when they borrow money
   to  buy  homes  already are at very low rates.  But such low interest
   rates  have  not spurred significant economic growth in the U.S., even
   though the recession officially has been over since June 2009. Â
   In  the  July-to-September  2010  period, the U.S. economy grew at a 2
   percent  annual  rate, slightly more than the 1.7 percent expansion of
   the  previous three months.  But economists think 3 percent growth is
   needed  over  a  period  of  time  before businesses will start hiring
   significant numbers of new workers.
   In  2009,  in  the  midst of the recession, the Federal Reserve bought
   $1.7  trillion in mortgage and treasury bonds.  By purchasing the new
   securities  gradually,  the central bank said it can review the effect
   on the economy before deciding how to proceed.

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