The Federal Reserve on Thursday, in an effort to target stubbornly high unemployment, offered an array of apparently open-ended stimulus programs designed to keep interest rates low until an economic recovery gains significant traction.
Federal Reserve Chairman Ben Bernanke hinted recently that Fed policy could soon be tied directly to the U.S. labor markets. The Fed’s announcement did just that.
In a statement, the Fed said, "If the outlook for the labor market does not improve substantially, the committee will continue its purchase of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability.”
Stock markets had long anticipated a single, large bond buying initiative, commonly referred to as QE III, and stocks briefly sold off following the 12:30 p.m. EST announcement by the Federal Open Markets Committee (FOMC).
Instead, they got the kitchen sink of stimulus measures and stocks quickly rebounded.
The Fed announced a program of mortgage-backed securities purchases valued at $40 billion each month. The Fed also said it would extend Operation Twist, a program initiated a year ago designed to shift the central bank’s portfolio toward long-term assets. Read more......