Fed to spend $40 billion a month on bond purchases
WASHINGON (AP) - The Federal Reserve says it will spend $40 billion a month to purchase mortgage-backed securities because the economy is too weak to reduce high unemployment. The Fed says it will keep buying more bonds until the job market shows substantial improvement.
The Fed also extended a plan to keep short-term interest rates at record-low levels through mid-2015. Both steps were announced after the Fed's two-day policy meeting Thursday.
Stocks rose after the Fed announcement. The Dow Jones industrial average was up 15 points for the day just before 12:30 p.m. It surged by 105 points within minutes of the announcement, then gave up some gains to be just 35 points higher.
The dollar dropped against major currencies, and the price of gold shot up about $16 an ounce, roughly 1 percent, to $1,750.
"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," the Fed said in a statement released after the meeting.
The statement was approved on an 11-1 vote. The lone dissenter was Richmond Fed President Jeffrey Lacker, who worries about igniting inflation.
The bond purchases are intended to lower long-term interest rates to spur borrowing and spending. The Fed has previously bought $2 trillion in Treasury bonds and mortgage-backed securities since the 2008 financial crisis.
Skeptics caution that further bond buying might provide little benefit. Rates are already near record lows. Critics also warn that more bond purchases raise the risk of higher inflation later.
With less than eight weeks left until Election Day, the economy remains the top issue on most voters' minds. Many Republicans have been critical of the Fed's continued efforts to drive interest rates lower, saying they fear it could ignite inflation.
The Fed is under pressure to act because the U.S. economy is still growing too slowly to reduce high unemployment. The unemployment rate has topped 8 percent every month since the Great Recession officially ended more than three years ago.
In August, job growth slowed sharply. Employers added just 96,000 jobs, down from 141,000 in July and well below what is needed to bring relief to the more than 12 million who are unemployed.
The unemployment rate did fall to 8.1 percent from 8.3 percent. But that was because many Americans stopped looking for work, so they were no longer counted as unemployed.
The Fed also extended a plan to keep short-term interest rates at record-low levels through mid-2015. Both steps were announced after the Fed's two-day policy meeting Thursday.
Stocks rose after the Fed announcement. The Dow Jones industrial average was up 15 points for the day just before 12:30 p.m. It surged by 105 points within minutes of the announcement, then gave up some gains to be just 35 points higher.
The dollar dropped against major currencies, and the price of gold shot up about $16 an ounce, roughly 1 percent, to $1,750.
"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," the Fed said in a statement released after the meeting.
The statement was approved on an 11-1 vote. The lone dissenter was Richmond Fed President Jeffrey Lacker, who worries about igniting inflation.
The bond purchases are intended to lower long-term interest rates to spur borrowing and spending. The Fed has previously bought $2 trillion in Treasury bonds and mortgage-backed securities since the 2008 financial crisis.
Skeptics caution that further bond buying might provide little benefit. Rates are already near record lows. Critics also warn that more bond purchases raise the risk of higher inflation later.
With less than eight weeks left until Election Day, the economy remains the top issue on most voters' minds. Many Republicans have been critical of the Fed's continued efforts to drive interest rates lower, saying they fear it could ignite inflation.
The Fed is under pressure to act because the U.S. economy is still growing too slowly to reduce high unemployment. The unemployment rate has topped 8 percent every month since the Great Recession officially ended more than three years ago.
In August, job growth slowed sharply. Employers added just 96,000 jobs, down from 141,000 in July and well below what is needed to bring relief to the more than 12 million who are unemployed.
The unemployment rate did fall to 8.1 percent from 8.3 percent. But that was because many Americans stopped looking for work, so they were no longer counted as unemployed.
I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world. No longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.
Â
Woodrow Wilson ~
Â
This country might, just maybe, wake-up and see the writing on the wall...... I hope.
Â
Money is not power, the people that OWN the debt have the power. How many drubbings does it take to pound this destructive and enslaving banks agenda into everyone's head?
@WARevolution
âI see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. Corporations have been enthroned, an era of corruption will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people, until the wealth is aggregated in a few hands, and the republic destroyed.â
â Abraham Lincoln, 16th President of the United States
Nice job burying this in the business section - this is scary!!
Yes, keep bailing out those banks and Wall Street while collecting their campaign dollars. No conflict of interest there.
Â
Yeah, that Romney guy would sure skaru us if HE gets elected by bailing out his buddies and forking over the taxpayer cash. Not like our current Halo Obama President. He's for the little guy.
Print more money out of thin air. That'll help for sure! HAHAHA! Looks like our purchasing power is going down another notch with Helicopter Bernanke at the helm....
 @hologram5 Agreed. Bernanke is straight scumbag. At least Greenspan truly is one smart SOB, and Volcker, he stood up to Reagan like a champ in those depression years. We have no tools now to stave off runaway inflation. We could be forced to make the Fed buy out the populace cash and bag the dollar the way this is going. The idea that a Chairman can't be ordered in emergency is just stupid. The rich are divesting dollars like crazy, but the poor don't have that choice.Â