News / USA

US Central Bank Adopts New Stimulus to Boost Economy

Federal Reserve Chairman Ben Bernanke gestures as he speaks during a news conference at the Federal Reserve Board in Washington,  December 12, 2012.
Federal Reserve Chairman Ben Bernanke gestures as he speaks during a news conference at the Federal Reserve Board in Washington, December 12, 2012.
VOA News
The U.S. central bank says it is embarking on a new plan to buy government securities, its latest effort to keep borrowing rates low and to boost the sluggish American economy.

Federal Reserve policy makers in Washington agreed Wednesday to buy $45 billion worth of government bonds each month, beginning in January, in addition to the $40 billion worth of real estate-related securities the central bank already is buying monthly.

Taken together, Federal Reserve Chairman Ben Bernanke said the asset purchases should exert "downward pressure" on long-term interest rates to encourage U.S. business growth and expand its labor market.

The Federal Reserve also said it would keep its benchmark lending rate at between zero and a quarter of a percentage point, and maintain it at that historically low level as long as the nation's jobless rate remains above 6.5 percent and consumer price inflation is limited. The U.S. unemployment rate has been falling, but still was pegged at 7.7 percent in November.

Bernanke said it could be mid-2015 before the U.S. jobless rate goes down to 6.5 percent. He said high unemployment has been devastating for the country.

"The conditions now prevailing in the job market represent an enormous waste of human and economic potential," he said. "The return to broad-based prosperity will require sustained improvement in the job market, which in turn requires stronger economic growth."

In a statement after a two-day meeting, the Fed said it felt compelled to start the new bond-buying program because "without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions."

Keeping interest rates low

One analyst, Greg McBride with Bankrate.com, said he thinks the Fed's action could boost the American economy.

"I expect it will push long-term interest rates lower, which means lower fixed mortgage rates, lower corporate borrowing rates," McBride said. "I think it will further fuel a stock market rally, depending on what happens with the fiscal cliff.”

The central bank has pumped hundreds of billions of dollars into the U.S. economy over the last two years through the purchase of government bonds and real estate-related securities. But the world's largest economy only advanced at a modest pace, 2.7 percent in the July-to-September period, as it recovers from the steep economic downturn in 2008 and 2009.


What is the U.S. Fiscal Cliff?

  • An agreement intended to force politicians to compromise and make deals.
  • Without a deal by January 1, 2013, sharp spending cuts would hit military and social programs.
  • Tax hikes also would go into effect.
  • The combination would reduce economic activity, and could boost unemployment and push the nation back into recession.
The Fed predicted the U.S. economy could advance by as much as 3 percent next year and 3.5 percent in 2014.

The impending "fiscal cliff"

The central bank adopted the new stimulus as President Barack Obama and Congress are engaged in contentious negotiations on how to resolve key government tax and spending issues by the end of the year. Bernanke said it is critical that they reach a compromise.

Washington is calling it a "fiscal cliff," about $500 billion worth of mandated spending cuts in key government programs and the expiration of tax breaks for most American workers that are set to take effect January 1, unless an alternative financial plan is adopted.

Independent analysts said that if the White House and Mr. Obama's Republican opponents in Congress do not reach agreement, the spending cuts and tax increases could push the American economy into its second recession in three years, possibly adversely affecting the world economy as well.

You May Like

Hezbollah Chief Says Does Not Want War But Ready for One

VOA's Jerusalem correspondent reports that with an Israeli election looming and Hezbollah's involvement in Syria, neither side appears interested in a wider conflict More

Multimedia VOA SPECIAL REPORT: Despite Danger, Best US Minds Battle Deadly Virus

Scientists at America's premier biological research center race to find effective drugs, speedier tests and a safe vaccine amid the deadliest outbreak of Ebola in history More

Kurdish Poet Battles to Defend Language, Culture

Kawa Nemir's work is an example of what he sees as an irreversible cultural and political assertiveness among Kurds in Turkey More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Egypt's Suez Canal Dreams Tempered by Continued Unresti
X
Heather Murdock
January 30, 2015 8:00 PM
Egypt plans to expand the Suez Canal, raising hopes that the end of its economic crisis may be in sight. But some analysts say they expect the project may cost too much and take too long to make life better for everyday Egyptians. VOA's Heather Murdock reports.
Video

Video Egypt's Suez Canal Dreams Tempered by Continued Unrest

Egypt plans to expand the Suez Canal, raising hopes that the end of its economic crisis may be in sight. But some analysts say they expect the project may cost too much and take too long to make life better for everyday Egyptians. VOA's Heather Murdock reports.
Video

Video Threat of Creeping Lava Has Hawaiians on Edge

Residents of the small town of Pahoa on the Big Island of Hawaii face an advancing threat from the Kilauea volcano. Local residents are keeping a watchful eye on creeping lava. Mike O’Sullivan reports.
Video

Video Pro-Kremlin Youth Group Creatively Promotes 'Patriotic' Propaganda

As Russia's President Vladimir Putin faces international pressure over Ukraine and a failing economy, unofficial domestic groups are rallying to his support. One such youth organization, CET, or Network, uses creative multimedia to appeal to Russia's urban youth with patriotic propaganda. VOA's Daniel Schearf reports.
Video

Video Mobile Infrared Scanners May Help Homeowners Save Energy

Mobile photo scanners have been successfully employed for navigational purposes, such as Google Maps. Now, a group of scientists from the Massachusetts Institute of Technology says the same technology could help homeowners better insulate their houses and save some money. VOA’s George Putic has more.
Video

Video Filmmakers Produce Hand-Painted Documentary on Van Gogh

The troubled life of the famous 19th century Dutch painter Vincent van Gogh has been told through many books and films, but never in the way a group of filmmakers now intends to do. "Loving Vincent " will be the first ever feature-length film made of animated hand-painted images, done in the style of the late artist. VOA’s George Putic reports.
Video

Video Issues or Ethnicity? Question Divides Nigeria

As Nigeria goes to the polls next month, many expect the two top presidential contenders to gain much of their support from constituencies organized along ethnic or religious lines. But are faith and regional blocs really what political power in Nigeria is about? Chris Stein reports.
Video

Video Rock-Consuming Organisms Alter Views of Life Processes

Scientists thought they knew much about how life works, until a discovery more than two decades ago challenged conventional beliefs. Scientists found that there are organisms that breathe rocks. And it is only recently that the scientific community is accepting that there are organisms that could get energy out of rocks. Correspondent Elizabeth Lee reports.
Video

Video Paris Attacks Highlight Global Weapons Black Market

As law enforcement officials piece together how the Paris and Belgian terror cells carried out their recent attacks, questions are being asked about how they obtained military grade assault weapons - which are illegal in the European Union. As VOA's Jeff Swicord reports, experts say there is a very active worldwide black market for these weapons, and criminals and terrorists are buying.
Video

Video Activists Accuse China of Targeting Religious Freedom

The U.S.-based Chinese religious rights group ChinaAid says 2014 was the worst year for religious freedom in China since the end of the Cultural Revolution. As Ye Fan reports, activists say Beijing has been tightening religious controls ever since Chinese leader Xi Jinping came to office. Hu Wei narrates.
Video

Video Theologians Cast Doubt on Morality of Drone Strikes

In 2006, stirred by photos of U.S. soldiers mistreating Iraqi prisoners, a group of American faith leaders and academics launched the National Religious Campaign Against Torture. It played an important role in getting Congress to investigate, and the president to ban, torture. VOA's Jerome Socolovsky reports.
Video

Video Former Sudan 'Lost Boy' Becomes Chess Master in NYC

In the mid-1980’s, thousands of Sudanese boys escaped the country's civil war by walking for weeks, then months and finally for more than a year, up to 1,500 kilometers across three countries. The so-called Lost Boys of the Sudan had little time for games. But one of them later mastered the game of chess, and now teaches it to children in the New York area. VOA’s Bernard Shusman in New York has his story.
Video

Video NASA Monitors Earth’s Vital Signs From Space

The U.S. space agency, NASA, is wrapping up its busiest 12-month period in more than a decade, with three missions launched in 2014 and two this month, one in early January and the fifth scheduled for January 29. As VOA’s Rosanne Skirble reports, the instruments being lifted into orbit are focused on Earth’s vital life support systems and how they are responding to a warmer planet.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid