14 Sep 2012

US Federal Reserve launches fresh stimulus

10:54 am on 14 September 2012

The US Federal Reserve has launched another aggressive stimulus programme, announcing it will resume its policy of pumping more money into the economy via so-called quantitative easing.

It says it will buy $US40 billion of mortgage-backed debt per month until the outlook for jobs improves substantially, as long as inflation remains contained.

The central bank also said it could increase the size of its purchases if the economy does not improve, the BBc reports.

Interest rates in the US have been close to zero for several years now, and the bank has again kept them at below 0.25%.

The central bank has already bought $US2.3 trillion in bonds in two earlier rounds of quantitative easing to support the economy.

The Fed calls these measures asset purchases, where the central bank buys bonds to keep the long-term cost of borrowing down.

US stocks and crude oil prices rose and the dollar weakened following the Federal Reserve announcement.

The Dow Jones industrial average ended up 206.51 points (1.55%) at 13,539.86. The Standard & Poor's 500 Index was up 23.43 points (1.63%) at 1,459.99. The Nasdaq Composite Index gained 41.51 points (1.33%) to 3,155.83.