Fed to Pump $267bn into Economy with Warning that US Recovery Is Slowing
THE GUARDIAN: Ben Bernanke extends Operation Twist stimulus but warns that unemployment is unlikely to improve before end of the year

The US Federal Reserve announced a $267bn plan to underpin the US's fragile recovery Wednesday as chairman Ben Bernanke warned that unemployment was unlikely to improve before the end of the year.

The plan – an extension of a scheme known as Operation Twist – aims to drive down long-term interest rate and encourage borrowing. The announcement came as the latest statement from the Fed painted a gloomier picture of the US economy and said it was prepared to take more action if necessary.

The Fed said that the growth in employment "has slowed in recent months, and the unemployment rate remains elevated," and that household spending "appears to be rising at a somewhat slower pace than earlier in the year." The Fed also reiterated its concern that "strains in global financial markets continue to pose significant downside risks" to growth.

That news will be a blow to the Obama administration in the run-up to an election that looks set to be dominated by economic news in general and the unemployment rate in particular.

At a press conference Bernanke said the Fed had been too optimistic in its projections for recovery, and warned again that Europe was a significant drag on the US recovery. » | Dominic Rushe in New York | Wednesday, June 20, 2012