Fed Chairman Ben BernankeU.S. Federal Reserve Wednesday launched the second phase of its quantitative easing program , the so-called QE2, saying it will buy up to $600 billion more in long-term U.S. Treasury bonds to help stimulate a U.S. economy that's growing too slowly.

The Fed said the new asset purchases would take place through June 2011 at about $75 billion per month, and when combined with existing asset purchases, would total about $110 billion per month.

The vote was 11-1, with Kansas City Fed President Thomas Hoenig again voting against the program, dissenting for the seventh straight Fed meeting. Hoenig "believed the risks of additional securities purchases outweighed the benefits" the Fed's statement said.

The Fed maintained its fed funds target range of zero to 0.25%.

In its statement, the Fed also maintained its language regarding monetary policy, reiterating that it will likely keep short-term interest rates at "exceptionally low levels" for an "extended period."

Fed Sees 'Disappointingly Slow' Recovery


The Fed added that considering its dual mandate of price stability and maximum employment, "Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow."

The Fed said it was expanding its asset holdings "To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate," adding that it will "will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability."

The Fed's announcement pushed U.S. stock markets lower, at least initially, with some see-saw action afterward during afternoon trading. The interest rate on the 10-year U.S. Treasury note rose to 2.61% from 2.54% before the announcement.

U.S. Economy's Slow Growth Ups Pressure On Fed

Although plenty of economists oppose additional stimulative action by the Fed, many others argue that more action -- conventional policy or quantitative easing -- has become necessary. U.S. GDP grew 2% in the third quarter, after expanding at 1.7%, 3.7% and 5% in the previous three quarters, respectively. The most recent pace is too slow to lower the nation's high 9.6% unemployment.

Growth of at least 2.5% would be needed to do that, and the duration of the expansion required to return the nation to normal unemployment levels of 3.5% to 5% speaks to size of the task at hand for policymakers. About 14.8 million Americans seeking work are unemployed. Another 7 million to 8 million are part-time workers who want full-time work but can't find it. That translates into an underemployment rate of 17.1%.

Assuming 250,000 new jobs per month, it would take about eight years to create enough jobs to employ both those currently out of work and new entrants to the workforce.

Even though not all of those roughly 15 million adults will keep looking for a job. Some will retire. But the economy isn't generating anywhere near 250,000 new jobs per month. The private sector hasn't added 200,000 jobs in any month since the recession started in December 2007. That will have to change if the nation hopes to return to employment levels that existed prior to the financial crisis.

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barbism

Great. Let's just give the banks even more money that they can hoard. Craziness. Give that $600,000,000,000 to WE THE PEOPLE and let US stimulate the economy!

November 04 2010 at 7:57 PM Report abuse +1 rate up rate down Reply
Leslie Roen

Create what new jobs???? Something that offers better wages???? Raise the minimum wage and when the cost of living goes up, so should our hourly wage...

November 04 2010 at 7:44 PM Report abuse rate up rate down Reply
smithdeane

I take it the bonds are no good , so we taxpayers are bailing out the crooks again , Thats right print more money , devalue all us who saved and worked and paid our bills , not buying on credit , getting by with somebodys discarded car and furniture from the curbside . What do we get , higher oil/ gas , higher food , higher taxes and lower pay and devalued savings . The aim is to get banks to loan money so people spend for the economy -- rediculious !!

November 04 2010 at 7:40 PM Report abuse +1 rate up rate down Reply
walkingman50

I've seen several news accounts re: how the stock market is up because of the Fed's actions. It seems impossible to me for the left wing press to ignore the 50 ton elephant in the roon called the ELECTION RESULTS but ,amazingly, they do.

November 04 2010 at 5:18 PM Report abuse +1 rate up rate down Reply
jeff

More money for other country and other peoples and the wealthy. Government need to stop giving money to other. The american peoples need help We need jobs We need to eat and need a place to live. It hard to find work and the government don't care they get pay and all the benefit they can get. They need to work for free like government used to do. Pay their own bill and benefit. Governemt should be for the American Peoples not for themself and other country. That would make the dollars go up. Give it away and it go down. Government need to do it " JOB "

November 04 2010 at 5:15 PM Report abuse +1 rate up rate down Reply
Robert Boshears

While on the subject of economics,,, if I get no raise for two years (because the King says there is no cost of living increase) why did my grad school tuition go up 15 per cent this year? Wouldn't it be nice if NOTHING increased for real? Two years to go for the next round of elections... if we have a country in two years.

November 04 2010 at 4:47 PM Report abuse +3 rate up rate down Reply
Robert Boshears

I am not an economist... but, if you buy your own debt... where or how can this help the country? If I write a "hot check" to pay off my car, do I get to keep the car as paid in full?

November 04 2010 at 4:43 PM Report abuse +3 rate up rate down Reply
Mark

THIS IS BAD

November 04 2010 at 4:43 PM Report abuse +2 rate up rate down Reply
SAM

after yesterday I feel like I woke up from a bad night mare, today I feel like I have faith in America again, we over come all the fraud the democrats threw at us, the sun is shinning on America again, and in two years its going to get brighter,

November 04 2010 at 3:29 PM Report abuse +2 rate up rate down Reply
SAM

I think the best thing for our government to do is get out of our hair, let the chips fall where they fall, if you have a company that no body buying your product, make it better or go out of business, if you have a union that's draining your co. dry with high wages, cut their pay in half, or go out of business. if the demands there some one else will take its place with out a union. I say the unions is the cause of a lot of unemployment, you have to make a cheap made car and sell at a high cost if you have a union, no body wants a cheap made car. most union people drive BMW.

November 04 2010 at 3:25 PM Report abuse +4 rate up rate down Reply