Operation Twist Leads Fed to Move $400 Billion to Long-Term Holdings

(September 22, 2011) — The Federal Reserve Open Market Committee (FOMC) has announced it will shift $400 billion to longer-term holdings.

Meanwhile, it will sell an equal amount of short-term securities by June 2012 in an effort to jumpstart the economy. “The committee is prepared to adjust those holdings as appropriate,” the Fed said in a statement.

According to the committee, the program should place downward pressure on longer-term interest rates and help make broader financial conditions more accommodating. Additionally, the Committee said it will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

Furthermore, the Committee decided to keep the target range for the federal funds rate at zero to 0.25%, while noting that economic conditions “are likely to warrant exceptionally low levels at least through mid-2013.”

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action were Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who did not support additional policy accommodation at this time.

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