Editorial Board
The Twist and Shout Should Be the Fed’s Next Maneuver: View
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Markets today are expecting the Federal Reserve to announce Operation Twist, a financial maneuver aimed at rescuing the U.S. recovery.
Like the Chubby Checker song, the twist will involve some gyrations. The idea is to flip the maturities of the Fed’s $1.65 trillion bond portfolio by selling short-term Treasuries and buying longer-term ones. The move would aim to bend down the interest rates charged on home mortgages, car loans and other big-ticket items in the hope of inducing more consumer borrowing and spending, and greater business investment. The Fed may also lower the interest rate it pays banks on the reserves they keep at the central bank, encouraging them to lend rather than hoard the money.