The Federal Reserve announced Thursday that the United States will definitely go into another round of quantitative easing, despite the economic failure of QE1 and QE2.
The central bank announced in a statement:
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
The difference between this round of quantitative easing and previous inflationary stimulus attempts made by the Fed is that this time the central bank announced an open-ended timeframe for bond buying. Essentially, the Fed has given itself the power to buy bonds for as long as it wants without announcing any more quantitative easing.
Gold stocks, as expected, skyrocketed after the announcement.