Fed unveils 'QE4' as it links rates to unemployment

The US Federal Reserve has expanded the scope of its quantitative easing programme and suggested interest rates will not rise until US unemployment falls below 6.5%.

The central bank signalled yesterday it will keep rates anchored for as long as the unemployment rate remains above 6.5% - providing it does not expect inflation to exceed 2.5% over the subsequent 1-2 years. That guidance was accompanied by an extension of its bond-buying programme. In addition to maintaining a $40bn per month programme of mortgage-backed securities purchases, the Fed will replace the expiring 'Operation Twist' with an additional $45bn per month of US treasury purchases. Operation Twist had seen the Fed sell short-dated bonds and buy longer-dated debt in an effort to ...