Fed move keeps $300 billion in U.S. economy through 2011, analyst says

The Federal Reserve’s move Tuesday to reinvest in Treasury securities will keep roughly $300 billion in the U.S. economy by the end of next year, according to financial analysts.

The central bank said it would maintain its current level of investment in U.S. securities by reinvesting its stake in maturing investments backed by mortgages and federal agencies. The money will be rolled over into Treasury securities.

While the move does not represent an overall increase in money pumping into the economy, Fed watchers estimated that the policy would keep about $300 billion from flowing out of the economy over the next year. The Fed pumped trillions of dollars into the U.S. economy during the depths of the financial crisis in an effort to stabilize the economy and housing market in particular.

The Fed’s move Tuesday came amid broader signs of economic uncertainty over the pace of the recovery. The economy expanded by 2.4 percent in the second quarter, down from 3.7 percent in the first three months of the year. The unemployment rate has been stuck near double-digit levels for months.

The Fed has roughly $50 billion in securities backed by federal agencies that are maturing in 2011 and roughly $250 billion in mortgage-backed securities that mature by the end of next year, according to an estimate by the Royal Bank of Scotland.

A Barclays Capital report said there is roughly $275 billion in mortgage-backed securities set to mature by the end of 2011, though the timing could change depending on when the investments are repaid.