Top officials of the U.S. Federal Reserve (central bank) announced a series of actions Wednesday intended to get the stalled credit market moving again.
The Fed said it will buy as much as $750 billion in mortgage-related
debt and up to $300 billion worth of long-term government bonds, which
has the effect of making more money available for loans.
Officials say this should make banks more likely to make the loans
consumers need to buy new homes and goods and that businesses need to
buy new equipment and hire new people.
The Fed blames the stalled credit market for making the economic downturn worse.
Central bank officials said the economy continues to shrink and called
the near-term economic outlook "weak." However, they expect "gradual"
improvements as low interest rates and efforts to bolster credit
markets begin to gain traction.
The actions came at the end of a two-day meeting in Washington where
officials kept the key interest rate at a historically low level (of zero to 0.25 percent).
Earlier Wednesday a report said U.S. consumer prices rose at the
fastest rate since last July. February's four-tenths-of-a-percent
increase was driven by higher prices for gasoline and clothing.
A separate study of U.S. trade shows the gap between what Americans
export and what they buy from foreign countries has narrowed. The
current account deficit fell to just under $133 billion in the last few
months of 2008.
Also Wednesday, U.S. President Barack Obama launched an effort to win
support for his economic policies with a visit to California and an
Internet video sent to an extensive network of political supporters.
In the video, Mr. Obama asks Americans to "knock on doors" and urge
neighbors to support his budget. He also asked them to phone and write
to members of Congress urging them to vote for the spending plan.
The president's $3.6 trillion budget has been attacked by opposition
Republicans for raising the federal deficit by spending and borrowing.