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Fed to spend $45 billion to sustain bond purchases

- Associated Press - Wednesday, December 12, 2012

WASHINGTON (AP) — 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.

The policies are intended to help an economy that the Fed says is growing only modestly, with 7.7 percent unemployment in November.

The Fed said it will direct the money into long-term Treasurys to replace an expiring bond-purchase program. The new purchases will expand its investment portfolio, which has reached nearly $3 trillion.

The central bank will continue buying $40 billion a month in mortgage bonds. All told, its monthly bond purchases will remain at $85 billion. They are intended to reduce already record-low long-term rates to encourage borrowing and accelerate growth.

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