Fed action will do little to boost economy

Operation Twist is a go, albeit with a small twist on the twist. The Fed's announcement today that it will act to extend the average maturity of its Treasury holdings, by buying $400bn of securities that mature in more than six years and selling an equal amount of its existing holdings that mature between three months and three years from now, is a little larger than we expected. Nevertheless, we still expect it to have only a limited downward impact on longer-term interest rates and the impact on the wider economy will be even more modest.