The Federal Open Market Committee (FOMC) decided today that additional purchases of credit instruments was required in order to promote economic recovery and to preserve price stability.

The FOMC will purchase up to $300 billion of longer-term Treasury securities over the next six months, in order to improve credit conditions.

Additionally, the FOMC announced it would expand its balance sheet by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, in order to provide greater support to mortgage lending and housing markets.

It will also increase purchases of agency debt by up to $100 billion to a total of up to $200 billion.

The committee kept its target overnight rate to a range between 0.00% to 0.25%, and said conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

Stocks rose sharply after the announcement was made and the dollar weakened considerably against the better yielding euro, pound and Australian dollar. EUR/USD went from 1.3120 just prior to the statement to 1.2290 within 15 minutes. The pound rose to 1.4225, its highest level since March 6.