Operation Twist

Search Dictionary

Definition of 'Operation Twist'

Operation Twist was a monetary policy of the United States Federal Reserve that ran from September 2011 to December 2012. The goal of Operation Twist was to lower long-term interest rates by selling short-term Treasury securities and buying long-term Treasury securities. This would increase the supply of short-term Treasury securities and decrease the supply of long-term Treasury securities, which would push down the yields on long-term Treasury securities.

Operation Twist was implemented in response to the financial crisis of 2008. The crisis had led to a sharp decline in economic activity and a rise in unemployment. The Federal Reserve lowered interest rates to stimulate the economy, but it was concerned that low short-term interest rates would lead to a rise in inflation. Operation Twist was designed to lower long-term interest rates without raising short-term interest rates, thereby stimulating the economy without increasing inflation.

Operation Twist was successful in lowering long-term interest rates. The yield on the 10-year Treasury note fell from 3.5% at the start of Operation Twist to 2.9% at the end of Operation Twist. However, it is not clear whether Operation Twist had a significant impact on economic growth or unemployment.

Operation Twist was controversial. Some economists argued that it was ineffective and that it would lead to a rise in inflation. Others argued that it was necessary to stimulate the economy and that it would not lead to a rise in inflation.

Operation Twist was the first time that the Federal Reserve had used a large-scale asset purchase program to target long-term interest rates. The Federal Reserve has used similar programs since Operation Twist, including Quantitative Easing (QE) and Operation Twist 2.0.

Do you have a trading or investing definition for our dictionary? Click the Create Definition link to add your own definition. You will earn 150 bonus reputation points for each definition that is accepted.

Is this definition wrong? Let us know by posting to the forum and we will correct it.