英语文摘:Fed announces new steps to boost U.S. economy

The Fed announced that it will purchase longer-term U.S. government debt at a pace of 45 billion U.S. dollars per month starting in January, a move to expand its third-round quantitative easing program, also known as the QE3.

The latest step came ahead of the expiration at the end of this month of "Operation Twist," in which the Fed sells 45 billion dollars of short-term Treasuries and replaces them with the same amount of longer-term government debt.

The current Operation Twist policy has to expire whether Fed policymakers like it or not, because the Fed will run out of short- dated bonds to sell, David Semmens, a senior economist of Standard Chartered Bank, said in a Wednesday research report.

The central bank in September started to buy agency mortgage- backed securities (MBS) at a pace of 40 billion U.S. dollars per month to bolster recovery of the housing market, the so-called QE3.

The new Treasuries-buying program unveiled on Wednesday will be funded by creating new money, further expanding the Fed's 2.9 trillion dollars balance sheet. Starting in January, the total monthly increase in the Fed's balance sheet will pick up speed from 40 billion dollars to 85 billion dollars to drive down long- term borrowing costs.

Since the onset of the financial crisis, the Fed has completed two rounds of quantitative easing programs, dubbed as QE1 and QE2. It has bought more than 2 trillion dollars of U.S. government debt, agency MBS and other assets. These programs have attracted sharp criticism both at home and abroad.

"The Fed is distorting one set of financial markets when trying to fix another set," Philip Suttle, Chief Economist of the Institute of International Finance (IIF), said in a recent interview.

The Fed's balance sheet expansion move will "stimulate risk appetite, as well as capital flows to emerging markets," contended Semmens.

The huge liquidity from central banks is creating another round of liquidity excess and risk-taking activities, echoed Suttle, adding what the United States really needs is triggering easier lending conditions for the private sector and home buyers to bolster economic growth.