(Image Source: Financial Post)


BY ANLI XIAO
ANCHOR ZACH TOOMBS

You're watching multisource business video news analysis from Newsy.

The Federal Reserve might announce another bond-buying program -- “Operation Twist” -- to lower long-term interest rates. The Wall Street Journal explains:

“The Fed would sell some of its short-term holdings and buy longer-term U.S. debt to push yields -- which are already at historic lows -- even lower.”

The Fed "twisted" back in 1960. If it happens again, it would be the third bond-buying program since November 2008. And according to the Los Angeles Times, it could be shout-worthy for consumers. The twist...

"...could help some Americans buy homes or refinance mortgages... The net effect, the Fed hopes, would be to twist the so-called yield curve, meaning the level of longer-term interest rates compared with short-term rates."

Would the Twist really help? According to The Oklahoman, some economists think it could be beneficial.

"…such action could lower the 10-year rate by an additional quarter-point. On the other hand, should the Fed decide not to take this step, long-term rates might head higher…"

It’s believed the Fed won’t create more money. According to The Independent, John Higgins of Capital Economics thinks that's one reason the twist might not have much of an effect.

"With no change in the overall size of the Fed's balance sheet and with yields already so low, any support for the economy or for riskier assets is likely to be limited."

Whether it will help or not, it's better than nothing, says a former Fed economist. He tells Bloomberg the Fed hasn't left itself much of a choice.

“Doing nothing at this point with the type of expectations they’ve allowed to form would be risky because it would cause a tightening in financial conditions, rates would go back up, and that goes in exactly the opposite direction they want”


Transcript by Newsy.