Fed moves to 'quicken' the economy recovery
The Federal Reserve unleashed a series of bold and open-ended steps Thursday designed to stimulate the economy by boosting the stock market and making it cheaper for people to borrow and spend.
The Fed said it will spend $40 billion a month to buy mortgage bonds for as long as it deems necessary to make home buying more affordable. It plans to keep short-term interest rates at record lows through mid-2015 -- six months longer than previously planned. And it's ready to try other stimulative measures if hiring doesn't pick up.
"The idea is to quicken the recovery," chairman Ben Bernanke said at a news conference. But Bernanke made clear that he thinks the economy will need the Fed's help even after the recovery strengthens.
The Fed's announcement means savers and retirees who rely on yields will continue to endure low returns for the foreseeable future.
But Wall Street celebrated the news. Stock prices rose steadily after the Fed's announcement at 12:30 p.m. The Dow Jones industrial average closed up more than 200 points. Other stock averages also surged.
The Fed's policy committee announced the aggressive actions after a two-day meeting. Its moves pointed to how sluggish the U.S. and global economies remain more than three years after the Great Recession ended.
Thursday's announcement marked the Fed's latest dramatic intervention since the financial crisis erupted in 2008 and the Great Recession shot unemployment into double digits. The Fed cut its benchmark short-term rate to near zero and has kept it there for nearly four years. And it has bought more than $2 trillion in Treasury notes and mortgage bonds to try to drive down long-term rates.
Yet for all that, the U.S. economy is still struggling. The unemployment rate is 8.1 percent. And the Fed estimated Thursday that the rate will fall no lower than 7.6 percent in 2013.
With less than eight weeks left until Election Day, the economy remains the top issue on most voters' minds. When asked whether the Fed considered the impact of its actions on the presidential election, Bernanke said: "We make our decisions based entirely on the state of the economy . . . We just don't take those factors into account."