WASHINGTON – The Federal Reserve announced a bold plan Wednesday to try to invigorate the economy by buying $600 billion more in Treasury bonds. The Fed said it would buy about $75 billion a month in long-term government bonds through the middle of 2011 to further drive down interest rates on mortgages and other debt.
This is in addition to an expected $250 billion to $300 billion in Fed purchases over the same period from reinvesting proceeds from its mortgage portfolio.
The idea is for cheaper loans to get people to spend more and stimulate hiring. The Fed said it will monitor whether adjustments are needed depending on how the economy is performing.
Some worry the Fed action will do little to boost the economy because interest rates are already historically low. Others fear the bond purchases could drive inflation too high over the long term and unleash speculative buying in assets like stocks.
Even analysts who favor the Fed's bond purchases cautioned against expecting them to rescue the sluggish economy
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