22 Sept, 2011
US Federal Reserve is shifting $400 billion from short- to long-term Treasury securities to push interest rates down and encourage companies to borrow and spend.
Impact on US Economy -
Fed’s efforts could add about 0.4 percentage points to economic output and create about 350,000 jobs.
Impact on US Markets -
Markets fell sharply (Dow Jones more than 2 % down). The markets expected a balance sheet expansion, instead Fed is simply moving money from less riskier short term securities to more risky long term securities to bring down interest rates by a few tenths of a percentage point, a significant increment when multiplied by the vast extent of borrowing.
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