Fed Announces New Quantitative Easing

September 13, 2012 - 12:59 PM

Bernanke

Federal Reserve Chairman Ben Bernanke. (AP Photo/J. Scott Applewhite)

(CNSNews.com) – The Federal Reserve announced a new round of quantitative easing on Thursday, saying that it would continue to pump money into the economy until the unemployment picture improves.

“[T]he [Federal Open Market] Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month,” the Fed said in a statement.

“If the outlook for the labor market does not improve substantially, the Committee will continue its purchases 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,” said the Fed.

In other words, the Federal Reserve will begin buying mortgage-backed securities from private holders at a level of $40 billion per month until the unemployment situation improves, effectively pumping $40 billion per month into the economy for an undetermined period of time.

This third round of easing differs from the previous two in that it is an open-ended commitment by the Fed to inject money into the economy, rather than a promise of a fixed amount of easing as seen in the past.

The Fed also announced it would extend its near-zero interest rates through 2015, effectively providing another year of monetary stimulus.