Posted on: 2012-09-13

By
Steve Goldstein

WASHINGTON (MarketWatch) -- By an 11-to-1 vote, the Federal Reserve on
Thursday decided to launch a new program of open-ended bond purchases --
so-called QE3 -- saying it will buy $40 billion of agency
mortgage-backed securities each month, starting Friday. It's also
keeping in place so-called Operation Twist, which consists of swapping
short-dated securities for longer-term securities, as well as
reinvesting the proceeds of maturing securities, so the central bank
will be adding $85 billion of long-term securities each month through
the end of the year. The Fed also extended its pledge to keep interest
rates exceptionally low -- Fed funds rates are currently targeted at a
rate between 0% and 0.25% -- from late 2014 to "at least through
mid-2015." The Fed said it's acting "to support a stronger economic
recovery" and expects the new program to put downward pressure on
longer-term interest rates, support mortgage markets and help make
financial conditions more accommodative. Richmond Fed President Jeffrey
Lacker, the only dissent, opposed both the asset purchases and the
description of the time period will remain exceptionally low.