Unveiling yet another stimulus to rejuvenate the sagging American economy, the Federal Reserve will purchase U.S. government bonds worth $600 billion by June next year.
The announcement, which is on expected lines, came on Wednesday against the background of the political revamp in the U.S. and concerns of high unemployment levels.
Terming the economic recovery as ‘disappointingly slow', the Fed has said that it would expand the purchase of government securities to bolster growth.
The Federal Open Market Committee (FOMC), the monetary policy making body, plans to “purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion a month.”
The Fed's latest move is generally termed as second round of quantitative easing (QE2) — measures aimed at boosting the national economy growth.
The apex bank has already bought government and mortgage securities worth about $1.7 trillion between January 2009 and March 2010.
These measures, coupled with near-zero interest rate regime, are happening amid the fading effect of the $700-billion stimulus package that was unveiled at the height of the financial meltdown in late 2008.
“The committee will regularly review the pace of its securities purchases and the overall size of asset—purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability,” Fed said on Wednesday.
In the September quarter, the American GDP expanded just 2 per cent while the jobless rate continues to hover near 10 per cent.
In what's seen as a blow to President Barack Obama's economic strategies, his Democrats' party this week lost control of the House of Representatives to rival Republicans.
Even though the Democrats hold majority in the Senate, Mr. Obama would be facing a stronger opposition in moving ahead with his administration's reforms agenda.