Federal Reserve Looks to Soften Fiscal Cliff Fallout

By: Associated Press
By: Associated Press

WASHINGTON (AP) -- The Federal Reserve meets this week and could try to soften the blow from the tax increases and spending cuts of the fiscal cliff if Congress can't reach a budget deal.

The Fed is expected to announce a new bond-buying plan to support the U.S. economy by further reducing long-term interest rates and encouraging borrowing by companies and individuals.

But Chairman Ben Bernanke warned last month that the Fed's actions wouldn't rescue the economy in a fiscal cliff scenario.

If higher taxes and government spending cuts were to last for much of 2013, most experts say the economy would sink into another recession.

Once its two-day policy meeting ends Wednesday, the Fed is likely to say it will start buying more long-term Treasurys to replace a program that expires at year's end.

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