The US Federal Reserve said tonight it would shift $400 billion in its debt portfolio holdings to longer-term bonds in hopes of cutting interest rates and stimulating more growth.
The Federal Open Market Committee kept its key interest rate target at an ultra-low 0-0.25%, saying economic growth "remains slow".
Read the full text of the Fed statement here
In a revival of the Fed's 1961 "Operation Twist" bond-buying programme, it said it would sell short-term bonds and purchase, by the end of next June, $400 billion of Treasury securities with 6-10 year maturities. But it would not increase its net bond purchases.
"This programme should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative," the FOMC said in a statement.
The aim of the operation is to try and lower long term interest rates to boost the economy by making mortgages more affordable. The scale of the intervention was larger than most market observers had expected, but is considerably lower than the amounts used in two earlier "quantitative easing" operations.
Three of the 10 FOMC members dissented from the move. They "did not support additional policy accommodation at this time," the statement said.
The Fed is under pressure to revive an economy that has limped along for more than two years since the recession officially ended.
In the first six months of this year, the economy grew at an annual rate of just 0.7%. The housing market remains depressed. The unemployment rate is 9.1%. In August, the economy did not add any jobs, and consumers didn't increase their spending on retail goods.
Most economists foresee growth of less than 2% for the entire year. They say the odds of another recession are about one in three.
The Fed has offered its own bleak outlook. At its August policy meeting, it said the economy would likely struggle for at least two more years. As a result, it said it planned to keep short-term rates near record lows until mid-2013, as long as the economy remained weak.
The Fed's efforts to stimulate the economy through low rates are occurring at a time when Congress is focused more on shrinking spending. President Barack Obama has proposed a $447 billion job-creation programme made up mainly of tax cuts and public works spending. Obama also wants the richest Americans to pay higher taxes to help cut federal budget deficits.
