US FEDERAL Reserve officials are considering a new approach to bond buying that aims to avoid fuelling inflation.
The Fed is considering new ways to buy bonds in order to boost growth. One possibility is that it could borrow back the money it used to buy those bonds for short periods of time at low interest rates, according to the Wall Street Journal.
Doing so would take that money out of circulation, or ‘sterilise’ it.
Representatives from the Federal Reserve and the New York Federal Reserve Bank, which conducts the central bank’s bond trading, declined to comment.
The Fed is holding a regular policy meeting next week but is not expected to launch another round of bond buying at that time.
However, chairman Ben Bernanke (inset) has signalled that he would consider another round of bond buying to support the fragile recovery if tepid growth and modest improvements in the labour market falter.
Many analysts believe that the Fed will resort to quantitative easing, later this year as higher oil prices and Europe’s economic problems weigh on the American recovery.