QE3: Fed To Spend $40B A Month On Bond Purchases To Boost Economy

Source: AP / CBS News

WASHINGON – The Federal Reserve says it will spend $40 billion a month to purchase mortgage-backed securities because the economy is too weak to reduce high unemployment. The Fed says it will keep buying more bonds until the job market shows substantial improvement.

The Fed also extended a plan to keep short-term interest rates at record-low levels through mid-2015. Both steps were announced after the Fed’s two-day policy meeting Thursday.

Stocks rose after the Fed announcement. The Dow Jones industrial average was up 15 points for the day just before 12:30 p.m. It surged by 105 points within minutes of the announcement, then gave up some gains to be just 35 points higher.

The dollar dropped against major currencies, and the price of gold shot up about $16 an ounce, roughly 1 percent, to $1,750.

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