The US Federal Reserve this evening announced it would inject $600 billion into the economy by the middle of next year to help safeguard the recovery.
The decision, which takes the Fed into largely uncharted waters, is aimed at further lowering borrowing costs for consumers and businesses still suffering in the aftermath of the worst recession since the Great Depression.
The US Fed said it would buy about $75 billion in longer-term Treasury bonds per month. It said it would regularly review the pace and size of the programme and adjust it as needed depending on the path of the recovery.
In its post-meeting statement, the Fed described the economy as 'slow', and said employers remained reluctant to add to staff numbers. It said measures of inflation were 'somewhat low'.
The US Federal Reserve also repeated its vow to keep the federal funds rate on overnight loans ultra-low for an extended period. Some analysts had speculated the Fed might broaden this commitment.
With the US economy expanding at only a 2% annual pace in the third quarter of this year and the jobless rate seemingly stuck around 9.6%, the Fed had come under pressure to do more to stimulate business activity.
The Fed had already cut overnight interest rates to near zero in December 2008 and bought about $1.7 trillion in US government debt and mortgage-linked bonds.
Those purchases, however, occurred when financial markets were stricken by crisis, and economists and Fed officials alike are divided over how effective the new programme will be.
Further bond purchases are viewed with a skeptical eye by many economists and some Fed officials. Indeed, some worry further bond buying could do more harm than good by providing tinder for inflation that will ignite when the recovery finally gains traction.
The Bank of Japan, which meets on Thursday and Friday, is also poised to launch a new round of bond buying. The European Central Bank and Bank of England also meet this week, but are not expected to shift policy.
