US Federal Reserve continues 'Operation Twist' stimulus

Federal Reserve building
Image caption The FOMC said there were "significant downside risks" to the US economic outlook

The US Federal Reserve has left interest rates unchanged and said that it will continue with its bond-buying stimulus programme.

However, one member of the Fed's rate-setting dissented and wanted more stimulus to the economy.

The Fed said it "continues to expect a moderate pace of economic growth over coming quarters".

Rates in the US are at a record low of between zero and 0.25%, and have been that way for three years.

The US unemployment rate dropped sharply to 8.6% in November, its lowest level in two-and-a-half years, from 9% the month before.

"While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated," the Fed said in a statement.

Referring to the eurozone debt crisis, the Fed said: "Strains in global financial markets continue to pose significant downside risks to the economic outlook."

In September, the Fed announced a $400bn (£254bn) bond programme, dubbed "Operation Twist" by observers.

Under the programme, the Fed said it would sell about $400bn of short-term bonds and buy longer-term debt. Buying bonds pushes the price up and lowers the interest rate, or yield.

The Fed hopes the move will help to keep long-term interest rates low, thereby boosting mortgage lending and loans to businesses.

Unlike quantitative easing, the policy does not inject any new money into the economy.

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