Fed does its 'Operation Twist'

In a nutshell, the central bank will sell $400 billion of short-term debt and buy $400 billion of long-term debt. This shifting is designed to lower Treasury yields - and perhaps reduce rates on mortgages and other consumer and business loans. From AP:

Many analysts have said the shift in the Fed's portfolio could provide modest help to the economy by reducing borrowing costs and perhaps raising stock prices. Others say it won't help and warn that the move could escalate inflation.

Economist Robert Shiller is among those who are dubious about the plan. From Bloomberg:

"Operation Twist in the '60s wasn't found to be a great success either," said Robert Shiller, an economics professor at Yale University and co-creator of the S&P/Case-Shiller home- price index. "Homeowners are relatively insensitive to mortgage rates when they are lacking confidence," he said. "The dramatic thing that is happening now is that their job isn't secure, if they even have one."

The Fed announcement does lay out a more discouraging outlook on the economy than had been seen a few months back.

Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has been increasing at only a modest pace in recent months despite some recovery in sales of motor vehicles as supply-chain disruptions eased. Investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable.

Here's the full announcement