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

US Border Patrol Union Accused of Taking Sides on Immigration

Report alleges agents leaking info to immigration opponents, appearing at their private events; Center for Immigration Studies director defends agents' actions More

Video Blind Somali Journalist Defies Odds in Mogadishu

Reporting from Somali capital for past decade, Abdifatah Hassan Kalgacal has been working at one of Mogadishu's leading radio stations covering parliament More

Video Rights Monitor: Hate Groups' Use of Internet to Inflame, Recruit Growing

Wiesenthal Center's Abraham Cooper says extremists have become skilled at celebrating violence, ideology on Web More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Hate Groups Spread Influence Via Interneti
X
Mike O'Sullivan
June 30, 2015 8:20 PM
Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video US Silica Sand Mining Surge Worries Illinois Residents, Businesses

Increased domestic U.S. oil and gas production, thanks to advances known as “fracking,” has created a boom for other industries supporting that extraction. Demand for silica sand, used in fracking, could triple over the next five years. In the Midwest state of Illinois, people living near the mines are worried about how increased silica sand mining will affect their businesses and their health. VOA’s Kane Farabaugh has more in this first of a series of reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Texas Defies Same-Sex Marriage Ruling

Texas state officials have criticized the US Supreme Court decision giving same-sex couples the right to marry nationwide. The attorney general of Texas says last week's decision did not overrule constitutional "rights of religious liberty," and therefore officials performing wedding services can refuse to perform them for same-sex couples if it is against their religious beliefs. Zlatica Hoke reports on the controversy.
Video

Video Syrians Flee IS Advance in Hasaka

The Syrian government said Monday it has taken back one of several districts in Hasaka overrun by Islamic State militants. But continued fighting elsewhere in the northern city has forced thousands of civilians from their homes. In this report narrated by Bill Rodgers, VOA Kurdish Service reporter Zana Omer describes the scene in Amouda, where some of the displaced are taking refuge.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.
Video

Video S. Korea Christians Protest Gay Rights Festival

The U.S. Supreme Court decision mandating marriage equality nationwide has energized gay rights supporters around the world. Gay rights remain a highly contentious issue in a key U.S. ally, South Korea, where police did a deft job Sunday of preventing potential clashes between Christian protesters and gay activists. Kurt Achin reports from Seoul.
Video

Video Saudi Leaks Expose ‘Checkbook Diplomacy’ In Battle With Iran

Saudi Arabia’s willingness to wield its oil money on the global diplomatic stage appears to have been laid bare, after the website WikiLeaks published tens of thousands of leaked cables from Riyadh’s Ministry of Foreign Affairs. VOA's Henry Ridgwell reports.
Video

Video Nubians in Kenya Face Land Challenges

East Africa's ethnic Nubians have a rich cultural history that dates back thousands of years, but in Kenya they are facing hardships, including the loss of lands they have lived on for generations. They say the government has reneged on its pledge to award them title deeds for the plots. VOA's Lenny Ruvaga reports.
Video

Video Military Experts Question New Russian Tank Capabilities

Russia has been showing off its new tank design – the Armata T-14. Designers claim it is 20 years ahead of current Western designs - and driving it feels like playing a computer game. But military analysts question those assertions, and warn the cost could be too heavy a burden for Russia’s struggling economy. Henry Ridgwell reports.
Video

Video In Kenya, Police Said to Shoot First, Ask Questions Later

An organization that documents torture and extrajudicial killings says Kenyan police were responsible for 1,252 shooting deaths in five cities, including Nairobi, between 2009 and 2014, representing 67 percent of all gun deaths in the areas reviewed. Gabe Joselow has more from Nairobi.
Video

Video In Syrian Crisis, Social Media Offer Small Comforts

Za’atari, a makeshift city in Jordan, may be the only Syrian refugee camp to tweet its activities, in an effort to keep donors motivated as the war in Syria intensifies and the humanitarian crisis deepens. Inside the camp, families say mobile phone applications help hold together families that are physically torn apart. VOA’s Heather Murdock reports.

VOA Blogs