The Federal Reserve said it would buy $40 billion each month of agency mortgage-backed securities on an open-ended basis, and said it could extend those purchases and buy additional assets if the jobs market doesn't improve.
The Fed also said it would continue a program known as Operation Twist, under which the central bank has been selling short-term bonds and using the proceeds to buy longer-term bonds.
Taken together, the Fed will be purchasing $85 billion of longer-term securities per month through the end of the year. Fed officials also said they expected to keep short-term interest rates near zero until at least mid-2015, beyond their previous estimate of late 2014.
Fed Chairman Ben Bernanke's says economics dictated the central bank's bold actions. But by acting so close to the election, he risks accusations that he's playing politics.
The Federal Reserve’s attempt to push aid into the heart of the US economy is being blunted by banks struggling to process mortgage applications fast enough, keeping rates on home loans elevated, according to the largest lenders.
The Fed announced last week that it would buy mortgage-backed securities in another round of quantitative easing – nicknamed QE3.
This was partly designed to ease further the cost of mortgages, but bankers say the impact will be limited by a dearth of loan officers with banks reluctant to cut mortgage rates without the staff to process any increase in business.
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