The central bank‘s decision to tie its controversial bond buying directly to economic conditions was an unprecedented step that marked a big escalation in its efforts to drive US unemployment lower. Stock prices jumped, while gold hit a six-month high as investors braced for faster inflation.
Unlike in its two previous bond-buying sprees, the Fed said it would only purchase mortgage-backed securities, hoping in part to un-stick a housing sector that Fed Chairman Ben Bernanke called “a missing piston” in the US recovery.
By buying mortgage-linked debt, the Fed hopes to press mortgage rates lower, helping the housing market and encouraging investors in MBS to switch into other assets, such as corporate bonds, lowering their yields as well.
In an additional move, the Fed said it was not likely to raise interest rates from their current near-zero level until at least mid-2015, a shift from its previous late-2014 guidance. To underscore its resolve, it said it would pursue an easy monetary policy “for a considerable time” even after the economy strengthened.
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reporter
Park Sae-jin
swatchsjp@ajunews.com