The Federal Open Market Committee released a statement Wednesday confirming expectations that it would extend its “Operation Twist” program as well as continue reinvestment of principal payments in its agency MBS and debt holdings, prolonging downward pressure on long-term rates.
Operation Twist, which involves sales or redemptions of shorter-term securities and investments in an equal amount of longer-term securities, was slated to end this month. But the Fed instead has chosen to continue it through yearend.
The Fed also said it would continue to keep the short-term fed funds rate low through at least 2014.
The committee also said it is “prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”
Continuing economic concerns worrying the Fed include the fact the housing sector remains depressed even though it shows “some signs of improvement” but employment remains the key concern.