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Fed Is Shooting For Lower Interest Rates

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By NEIL IRWIN

The Washington Post

Published: March 19, 2009

WASHINGTON - The Federal Reserve said Wednesday that it will deploy an additional $1.2 trillion to try to lower interest rates and stimulate the economy, an aggressive move aimed at containing the recession.

The central bank will increase its purchases of mortgage-backed securities by $750 billion on top of a previously announced $500 billion. It also will double its purchases of debt in Fannie Mae and Freddie Mac to $200 billion. Those steps are intended to lower mortgage rates. The announcement of the previous purchases pushed mortgage rates down a full percentage point.

The Fed also said it will buy $300 billion in long-term Treasury bonds. That move will lower long-term interest rates for the U.S. government directly and, Fed officials hope, will indirectly lower borrowing costs for businesses and individuals.

Since cutting the interest rate it controls to essentially zero in December, the Fed has had to find other tools to try to combat a rapidly deepening recession. At its policymaking meeting that concluded Wednesday, the central bank left that rate at a range of zero to 0.25 percent.

The vote was unanimous, in contrast to the Federal Open Market Committee's previous meeting, at which one official dissented.

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