The US Federal Reserve launched another aggressive stimulus program Thursday, saying it will buy $40-B of mortgage debt per month and continue to purchase assets until the outlook for jobs improves substantially.
In a significant shift in the direction of US monetary policy, the Fed has tied its unconventional bond buying directly to economic conditions, a move that is likely to be controversial among central bank critics.
If the outlook for the labor market does not improve substantially, the committee will continue its purchase of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability, the Fed said in a statement.
In an additional step that reflects just how concerned Fed officials have become about the health of the economy, policymakers said they would not likely raise rates from current rock-bottom lows until at least mid-Y 2015. Previously, it had set such guidance at late Y 2014.
The decision comes in the face of questions about the likely effectiveness of a further foray into unorthodox monetary policy.
The latest purchases build on the $2.3-T in US government and housing-related debt the Fed has already bought.
The new move is even bolder than many investors had anticipated given its open-ended nature and clear links to unemployment.
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.