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Fed Shifting $400B Into Long-Term Holdings In Effort to Help Housing Market

Fed Chairman Ben Bernanke

The Federal Reserve will move its balance sheet more heavily toward long-term holdings in an effort to keep long-term interest rates down and help the housing sector, it was announced Wednesday.

The Fed said that, by June 2012, it will sell $400 billion in short-term Treasury securities. The Fed will then use the proceeds to purchase long-term Treasury securities.

The Fed will also reinvest proceeds from maturing mortgage and agency bonds back into the mortgage market, which has remained weak.

“Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated,” the Fed said in a statement.

The Fed said a reduction in longer-term interest rates will contribute to a broad easing in financial market conditions, helping to stimulate economic recovery.

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