FOMC Announces $400B "Twist" to QE Program

The US Federal Open Market Committee (FOMC) held the fed funds rate unchanged at 0 to 0.25 percent, and announced a refocus of its quantitative easing program (the so-called 'twist').  The Fed announced: "The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest ratesand help make broader financial conditions more accommodative."

The Fed previously held monetary policy settings unchanged at its August meeting, where it committed to low rates until 2013.  The US reported inflation of 3.8% in August, and 3.6% in both July, June and May, up from 3.2% in April, as high commodity prices caused a broader increase in prices.  Meanwhile the US economy grew 1.3% in Q2, compared to 0.4% in Q1 this year.  

The Fed also announced it would "reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Committee will maintain its existing policy of rolling over maturing Treasury securities at auction."

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