On Sept. 21 the Federal Reserve announced what has been called “Operation Twist,” part of a multi-billion dollar effort to decrease pressure on long-term interest rates.
The Fed intends to sell $400 billion in short-term Treasury securities by the end of July 2012 and use the proceeds to buy long-term Treasury securities.
The extension plan, according to the Reserve’s website, will provide additional support to the current economic situation, but its effects are difficult to estimate at this time.
Sales resulting from the $400 billion extension program will take place in Treasury securities with remaining maturities of 3 months to 3 years, according to the Reserve’s press release.
“I think [the extension program] will have a positive impact but not very large,” said Dr. David Kass of the Smith School’s finance department. “We need monetary stimulus and fiscal stimulus. This will help towards monetary stimulus. We also need Congress to do its part along with the president to provide fiscal stimulus.”
“I think this going to help our current financial situation,” said sophomore finance major Kyle Convissar. “We’re waiting for the business world to start believing we are in the clear. The government is just trying to buy time.”