Fed Stays Low, Looks At Buying Treasuries

By Douglas A. McIntyre Published Jan 28, 2:52PM EST

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According to MarketWatch, "The Federal Reserve said Wednesday that it would keep intact its current policy of record-low interest rates. In a statement following its meeting, the central bank also said it’s prepared to buy U.S. Treasuries if warranted. The Fed said the economy was weakening, but that it still expected a recovery in the second half. The Fed said it was worried about deflation. The Fed said it would continue to pump money into the various credit channels. Richmond Fed president Jeffrey Lacker dissented. He wanted the central bank to buy Treasuries instead of other assets."

MarketWatch added:

The Federal Reserve said Wednesday it was prepared to purchase longer term Treasury securities if needed to improve conditions in private credit markets.

This would be a new tool in the Fed’s arsenal to repair financial markets. The move would be controversial.
The Federal Open Market Committee kept its interest rate target in a range of zero to 0.25%, as expected. Rates will need to stay close to zero for "some time," the statement said.

Fed watchers believe that rates may stay close to zero for more than a year. In the statement after the meeting, the Fed made clear it would continue to flood the financial system with money.

The Fed said was ready to buy Treasuries "if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets."

Some economists worry that buying Treasuries would cause foreign investors to lose their appetite for the securities.

Douglas A. McIntyre

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.