Fed moves to lower long-term interest rates, mortgage rates

— -- In a further bid to shore up the anemic economy, the Federal Reserve Board will buy $400 billion in long-term Treasury securities by June 30.

The new program, called "The Twist," after a similar '60s-era program, means the Fed will sell its holdings of short-term Treasuries to finance its purchases on long-term notes and bonds.

"This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative," the Fed said in its statement Wednesday.

Other actions:

•The key fed funds rate will remain between 0% and 0.25%, probably through June 2013.

•The Fed will also buy mortgage-backed securities to keep mortgage rates low.

In its statement, the Fed painted a picture of a barely growing economy: High unemployment, depressed housing, low household spending. The statement said the Fed thinks unemployment will only shrink slowly.

"It's more like a 'Twist and Shout,'" says Mark Vitner, senior economist at Wells Fargo. "They're making it known that they will do more if they need to."

The Fed's moves will presumably lower mortgage rates even further. The current 30-year fixed-rate mortgage rate is 4.09%, the lowest since mortgage giant Freddie Mac began tracking them in 1970. "That's good if you're among those who can refinance," says Ryan Brecht, senior economist at Action Economics.

Savers could see a very modest increase in short-term rates as the Fed sells off its short-term securities to buy long-term ones.

The Fed's move is in defiance of a letter sent Monday to Fed Chairman Ben Bernanke from four ranking congressional Republicans that urged the Fed not to further stimulate the economy.

"Such steps may erode the already weakened U.S. dollar or promote more borrowing by overleveraged consumers," said the letter, which was signed by Senate Republican leader Mitch McConnell, Senate Republican Whip Jon Kyl, House Speaker John Boehner and House Majority Leader Eric Cantor.

The letter is unprecedented in recent times. "It's in our country's long-term best interest to have an independent central bank, not one seen as kowtowing to the president or Congress," Vitner says.

Brecht noted that Wednesday's statement emphasized the Fed's dual mandate of fighting inflation and encouraging full employment. "The mandate doesn't say that one is more important than the other," he says.

Three members of the Fed's powerful Open Market Committee dissented from Wednesday's statement: Richard Fisher, Narayana Kocherlakota, and Charles Plosser.