QE3 is here.
The Federal Reserve announced today that it will begin buying $40 billion dollars a month worth of mortgage-backed securities in an effort to cut borrowing costs for home buyers and other borrowers. The central bank also pledged to keep short-term rates near zero until at least mid-2015.
In a statement, the agency’s Board of Governors explained that the new round of quantitative easing is open-ended.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
In a press conference this afternoon, Fed Chairman Ben Bernanke told reporters that his agency “will do enough to make sure that the economy gets on the right track.”
“We wanna see more jobs, we wanna see lower unemployment, we wanna see a stronger economy that can cause the improvement to be sustained,” Bernanke explained. He refused to say, however, how far the nation’s jobless rate would have to drop in order for himself and other Fed members to agree to wind down the new effort.