Federal Reserve to Keep Interest Rates Low Until Unemployment Rate Falls to 6.5%

[Frodo]

Fed ties stimulus to jobs, inflation in unprecedented steps to bolster economy

By Zachary A. Goldfarb,
Updated: Wednesday, December 12, 3:34 PM

The Federal Reserve announced Wednesday that it will take unprecedented steps to bolster the economy, saying it will continue to stimulate growth until the unemployment rate falls to 6.5 percent or the inflation rate reaches 2.5 percent. The Fed said it did not expect unemployment to reach that benchmark until 2015.

It was a historic move that for the first time explicitly spells out the Fed’s goals for the nation’s economy and how it will respond to changing conditions.

The Fed says it will also begin buying $45 billion in Treasury bonds per month, on top of $40 billion per month it is already buying in mortgage bonds. The measures come as the nation braces for a possible recession if Congress and the White House do not reach a deal to avert a series of tax increases and major spending cuts set to go into effect at the end of the year.