Open-Ended QE3 Spikes Market

September 13, 2012 12:53 PM EDT
Ben Bernanke and Co. delivered on promises of QE3 Thursday afternoon, announcing a new opened-ended bond buying program and a continuation of 'Operation Twist'.

To spur growth, the FOMC said it will purchase additional agency mortgage-backed securities at a pace of $40 billion per month. This is in effect new money printing. There was no timetable given on when this new bond-buying program will end, instead they left it open-ended.

The Fed will also continue through the end of the year its program to extend the average maturity of its holdings of securities, or Operation Twist.

Taken together, the programs will increase the Fed's holdings of longer-term securities by about $85 billion each month through the end of the year. This should should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

The Fed said if the outlook for the labor market does not improve substantially, "the Committee will continue its purchases 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 also said it will keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015. This was extended from its prior target of " at least through late 2014."

Heading into the 1PM hours, the Dow is up 81, the S&P 500 is up 10 and the Nasdaq is up 21.

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