Fed boosts QE and ties rates to unemployment level In a surprise move, the Fed also adopted numerical thresholds for policy, a step that had not been expected until early next year. In particular, the Fed said it will likely keep official rates near zero for as long as unemployment remains above 6.5pc, inflation between one and two years ahead is projected to be no more than 2.5pc, and long-term inflation expectations remain contained. Under the "Operation Twist" program that will expire at the end of the month, the Fed was buying $45bn in longer-term Treasuries with proceeds from the sale of short-term debt. The new round of government bond-buying it announced on Wednesday will be funded by essentially creating new money, further expanding the Fed's $2.8 trillion balance sheet. The Fed cut overnight interest rates to near zero in December 2008 and has bought about $2.4 trillion in bonds in a further effort to push borrowing costs lower and spur a stronger recovery. Despite the unconventional and aggressive efforts, US economic growth remains tepid. GDP grew at a 2.7pc annual rate in the third quarter, but it now appears to be slowing sharply. According to a Reuters poll published on Wednesday, economists expect the economy to expand at just a 1.2pc pace in the current quarter. Businesses have hunkered down, fearful of a tightening of fiscal policy as politicians in Washington wrangle over ways to avoid a $600bn mix of spending reductions and expiring tax cuts set to take hold at the start of 2013. Bernanke has warned that running over this "fiscal cliff" would lead the economy into a new recession. Back in September, the Fed predicted the US economy would expand 2.5pc to 3pc in 2013, but even that modest rate is looking potentially rosy. The Reuters poll showed a median US growth estimate of 2.1pc for next year on the same fourth quarter over fourth quarter basis.