The US central bank, the Federal Reserve, yesterday took aggressive new measures to salvage the faltering American economy. Policymakers unveiled plans to replace $400billion (£250billion) of short-term debt with the same sum of long-term debt in an effort to drive down long-term interest rates to encourage investment in a move called “twisting”. The size of the programme was bigger than expected and, allied to a gloomy prognosis for the US economy, proved enough to knock Wall Street. “Economic growth remains slow,” the Federal Open Markets Committee said. It added unem­ployment remained high, household spending weak and inflation had moderated, allowing the bank to take action. he move by the Fed, headed by Ben Bernanke, came as the Bank of England also signalled it would be looking to help the economy with an “immediate” return to pumping in more money and interest rate cuts. But the FTSE 100 fell 75.3 points to 5288.41 amid continued economic woe following warnings on Tuesday from the International Monetary Fund. The IMF yesterday heightened the gloom by warning the global financial system is now at its most vulnerable since the 2008 financial crisis. Some European banks are especially weak and “need to bolster their capital levels,” the organisation said in its Global Financial Stability report. It added the eurozone debt crisis had increased banks’ risk exposure by e300billion (£264billion), sparking new signs of stress in the money markets. Credit agency Moody’s downgraded US giants Bank of America, Wells Fargo and Citigroup, saying they could no longer rely on government help in crisis. BGC Partners’ Louise Cooper warned a second crunch was looming, with banks struggling to find funding. She said it was possible a lot of European banks did their longer-term funding at the start of the year but they would have to raise money soon. “The dysfunctional state of the credit markets cannot continue for months without a significant credit crunch.”