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Federal Reserve Announces Additional Asset Purchases

Washington, DC
Wednesday, December 12, 2012

The Federal Reserve's Federal Open Market Committee (FOMC) wrapped up a two-day policy meeting, Wednesday, followed by a press briefing by Fed Chairman Ben Bernanke.

According to the Associated Press, "the Federal Reserve will spend $45 billion a month to sustain an aggressive drive to keep long-term interest rates low. And it set a goal of keeping a key short-term rate near zero until unemployment drops below 6.5 percent."

Fed Chairman Bernanke told reporters at the briefing that the Federal Reserve intends to continue asset purchases until the employment situation improves. He said that changes to the policy guidance process, also announced today, would hopefully provide individuals and businesses with more stability and confidence.

Asked about the "fiscal cliff," a phrase which Bernanke himself coined, he said "clearly the fiscal cliff is already affecting the economy." If the country is allowed to go off the fiscal cliff, he continued, the Fed may have to take additional action. But "we cannot offset the entire fiscal cliff," he said.

After June's FOMC meeting, the Fed chairman told reporters that the foreign and housing markets remain sluggish, which in turn slows the overall economic recovery. He also noted that tight budgets at the state and local government level are causing slow growth, as well, because of their effect on employment and planning among agencies and contractors.

The FOMC consists of twelve members, including the seven members of the Board of Governors of the Federal Reserve System. The group holds eight meetings per year to review economic and financial conditions, determine monetary policy, assess the goals of price stability and review current economic growth.

Updated: Wednesday, December 12, 2012 at 3:31pm (ET)

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