|
The Fed has also extended a program called Operation Twist. Under this program, the Fed sells short-term Treasurys and buys longer-term Treasurys. The goal is to lower longer-term interest rates. Even if the Fed launched a third round of bond purchases, few think that further lowering long-term rates would provide much benefit to the U.S. economy. Most businesses and consumers who aren't borrowing now aren't likely to change their minds if rates slipped a bit more. The yield on the benchmark 10-year Treasury note is already just above its record low of 1.39 percent, which it touched last week. The national average rate for a new-car loan barely tops 3 percent. And the average on a 30-year fixed-rate mortgage fell below 3.5 percent last week for the first time on records dating back 60 years. Some regional Fed bank presidents have expressed concern that expanding the Fed's investment portfolio beyond its current record $2.9 trillion to try to lower rates more would heighten the risk of high inflation later. "Various Fed officials have made it pretty clear they want to do something, but they still have a lot of discussion to go through before they get to a decision," said Diane Swonk, chief economist at Mesirow Financial in Chicago. "How do you get the biggest bang for the dollar when the ammunition you have left is limited?" Some analysts have also suggested that the Fed might be reluctant to act aggressively as the November election nears, out of concern it could be seen as affecting the vote. If the Fed does announce further bond buying, some think the purchases might be divided between Treasurys and mortgage-backed securities. Though at record lows, mortgage rates are still higher than rates on some other loans. Further declines in those rates could help fuel home sales.
[Associated
Press;
Copyright 2012 The Associated
Press. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
News | Sports | Business | Rural Review | Teaching & Learning | Home and Family | Tourism | Obituaries
Community |
Perspectives
|
Law & Courts |
Leisure Time
|
Spiritual Life |
Health & Fitness |
Teen Scene
Calendar
|
Letters to the Editor