Fed: Rates to stay low until jobless below 6.5%

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Patrick Rizzo and John Schoen

The Federal Reserve is keeping its foot hard on the economy?s accelerator amid persistent high unemployment that may be sapping the confidence of consumers and businesses.

The nation's central bank announced Thursday that it would purchase longer-term Treasury securities to the tune of $45 billion per month to maintain a drive to help accelerate the sluggish economy and boost employment.

It also, for the first time, set a specific target for how long interest rates would remain at historic lows near zero percent: as long as the unemployment rate, now at around 7.9 percent, remains above 6.5 percent.

"Although the unemployment rate has declined somewhat since the summer, it remains elevated," the Fed said in a statement released after a two-day meeting of its policy setting Federal Open Market Committee.

LIVE VIDEO: Ben Bernanke holds press briefing on current economic projections?

Consumers and businesses also?have turned gloomy as Congress and the White House remain deadlocked on a budget deal. Until a compromise is reached by year-end, a half trillion-dollar package of tax hikes and spending cut will kick in, producing a major drag on economic growth.

The mood of American consumers ? who account for more than two third of economic activity ? turned markedly sour this month, according to a survey released last week. The Thomson Reuters/University of Michigan's preliminary reading of its index of consumer sentiment plunged to the lowest level since August.

Small business managers are also feeling downbeat. Sentiment tumbled to its lowest level in more than 2-1/2 years in November, according to the National Federation of Independent Business. The group?s monthly optimism index plummeted to its weakest reading since March 2010.

The extension of the central bank?s bond buying program, known as ?Operation Twist,? was widely expected and has helped prop up stock markets over the past few sessions. The plan involves buying Treasury debt in the open market, which helps create more demand and drive interest rates lower. Record low mortgage rates have helped revive the housing market and lowered monthly payment for millions of homeowners, freeing up more money for consumer spending.

The vote was nearly unanimous, with one dissenting vote from Jeffrey Lacker, president of the Federal Reserve Bank of Richmond.?

Source: http://www.nbcnews.com/business/economywatch/fed-tweaks-stimulus-plan-help-boost-economy-1C7578242

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