La Federal Reserve extended Operation Twist through the end of the year. The American Central Bank also announced, at the end of the meeting of the FOMC (its monetary policy arm), that will leave rates unchanged between 0 and 0,25%. As for forecast for 2012, US growth forecasts cut from 2,4-2,9% announced in April to 1,9-2,4%, while inflation estimates have dropped from 1,9-2% to 1,2-1,7%.
Operation Twist, the $400 billion stimulus program that began last September, was set to expire in June. This involves the sale of short-term securities, with a maximum maturity of three years, followed by the purchase of long-term securities with lower yields.
By extending Operation Twist, the Fed decided to stall, giving a modest amount of help to the economy, while waiting to take more decisive action. The bond purchases will continue until the end of the year for a value in the second half of 2012 of 267 billion dollars.
The Federal Reserve then emphasized that it is “ready to take further action if needed to foster a more robust economic recovery and to support a more marked improvement in employment”. The economic stimulus is justified by "corporate investment that continues to rise" and by slowing inflation.
Finally, the central bank announced that the cost of money will remain at exceptionally low values at least until the end of 2014 and that the economy is expanding at a moderate pace in 2012, with unemployment expected to continue to fall slowly.
