The Federal Reserve announced a fresh round of asset purchases aimed at spurring borrowing and boosting the economy.
- The central bank will keep buying $40 billion in mortgage-backed securities per month and will begin buying $45 billion in long-term Treasury securities per month.
- In an unexpected move, the Fed set a target unemployment rate of 6.5 percent and said it wants to keep the inflation rate no higher than 2.5 percent over a one- or two-year horizon. This indicates that the Fed does not expect to shift from its low-interest rate stance until those targets are met.
- The bond-buying move will further expand the Fed’s balance sheet and accompanies the bank’s open-ended quantitative easing program, known as QE3.
- Fed Chairman Ben Bernanke will explain the bank’s actions at a press conference this afternoon. He is expected to repeat his warning to Congress that the Fed can do little to offset the economic impact of going over the year-end fiscal cliff.