US economy gets $1.2 trillion boost

The US Federal Reserve has moved to pump $1.2 trillion into the country's financial system, hoping to spur lending to beat the recession.Concluding a two-day policy meeting on Wednesday, the central bank said it would buy up to $300bn in longer-term government bonds called treasuries to bring down borrowing costs. The surprising move to buy its own government's debt for the first time since the 1960s sparked a rally on Wall Street, with the Dow Jones industrial average, which had been down earlier in the day, rising to close 1.2 per cent higher at 7,486.58. "Although the near-term economic outlook is weak, the committee anticipates that policy actions ... will contribute to a gradual resumption of sustainable economic growth," the Federal Reserve said on Wednesday. In addition to purchasing treasury debt, the central bank said it would expand by $850bn an existing programme to buy debt and securities issued by mortgage finance agencies to $1.45 trillion, in an effort to lower mortgage rates.