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Fed to buy $600 billion of Treasurys

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The Federal Reserve Wednesday unveiled a controversial new plan to buy U.S. Treasurys, hoping to spur growth in a disappointingly slow U.S. economy.

After two days of discussions, Fed officials decided to go ahead with a much anticipated program, saying they will buy $600 billion of U.S. government debt over the next eight months.

The Fed’s policy-setting body said it stands ready to purchase more bonds if the economy’s persistent weakness leads inflation to remain too low and unemployment too high.

The Fed’s first $1.75 trillion bond-buying program, which ran from Dec. 2008 to March 2010, is credited with helping the economy when the U.S. was hit by a financial crisis and a deep recession. The latest move is more controversial because the economy is now growing — albeit slowly — and financial markets are no longer under severe stress.

By buying government bonds, the Fed aims to keep long-term interest rates low, hoping it will lead consumers to spend and companies to invest more, thus helping to propel the economy forward. Short-term interest rates were slashed close to zero in Dec. 2008, so the Fed no longer has its traditional weapon to boost the economy.

Full story: Fed to Buy $600 Billion of Treasurys – WSJ.com

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