THE FEDERAL Reserve may replace its so called Operation Twist with further conventional quantitative easing at the start of next year, its latest minutes suggested last night.
Operation Twist has involved the Fed selling its short-term securities and using the proceeds to buy longer-term debt, in a bid to stimulate growth by weighing down even more on long-term borrowing costs.
Yet the Fed has recently appeared to regain an appetite for expanding its balance sheet, and minutes of its October meeting show that more could be to come.
“A number of participants indicated that additional asset purchases would likely be appropriate next year after the conclusion of the maturity extension programme in order to achieve a substantial improvement in the labour market,” it said.
The recent re-election of President Barack Obama has boosted the chance of Fed boss Ben Bernanke staying in his post until January 2014.
Bernanke has led the Fed in its mass asset-buying programme, with some commentators suggesting that he could have been forced out of the job had Obama’s opponent, Mitt Romney, won the battle for the White House.