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| English: President Barack Obama confers with Federal Reserve Chairman Ben Bernanke following their meeting at the White House. (Photo credit: Wikipedia) |
Unlike in its two previous bond-buying sprees, the Fed said it would only purchase mortgage-backed debt, hoping in part to unstick a housing sector that Fed Chairman Ben Bernanke called "a missing piston" in the U.S. recovery.
One top Republican charged that the move was a bid to help President Barack Obama ahead of November's closely contested presidential election. Republican nominee Mitt Romney's campaign said it confirmed the failure of Obama's policies.
Bernanke dismissed talk the Fed was taking sides, saying it acted solely because of the dire state of the U.S. labor market.
"The employment situation ... remains a grave concern," Bernanke told reporters. "While the economy appears to be on a path of moderate recovery, it isn't growing fast enough to make significant progress reducing the unemployment rate." The economy created just 96,000 jobs last month, less than needed to keep up with population growth. While the unemployment rate edged down to 8.1 percent, it was only because many Americans gave up on the search for work.
By buying mortgage-linked debt, the Fed hopes to press mortgage rates lower, helping the housing market and also encouraging investors in MBS to switch into other assets, lowering their yields as well.
Those lower borrowing costs should spur more lending and foster faster economic growth, officials believe. U.S. growth cooled in the second quarter to a tepid 1.7 percent annual rate, and forecasters do not see the economy doing much better now. ... Continue to read.
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