The Federal Reserve said it will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month in a bid to boost growth and reduce unemployment.
“If the outlook for the labor market does not improve substantially, the committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases and employ its other policy tools as appropriate,” the Federal Open Market Committee said today in a statement at the end of a two-day meeting in Washington.
Growing expectations of additional stimulus have helped propel a rally in stocks and commodities. The Standard & Poor’s 500 Index rose 4.5 percent through yesterday since the Fed’s last statement on Aug. 1 to near the highest level in more than four years. The S&P GSCI Spot Index of 24 commodity prices has risen 7.1 percent.
Some companies are planning to reduce staff. Printer maker Lexmark International Inc. on Aug. 28 announced plans to eliminate 1,700 jobs globally. Hewlett-Packard Co., the world’s largest personal-computer maker, said Sept. 10 that it would cut 29,000 jobs, an expansion of a reorganization plan first announced in May.
Fed district bank presidents, including Richmond’s Jeffrey Lacker, Philadelphia’s Charles Plosser and Dennis Lockhart of Atlanta, have also raised concerns about inflation or whether more Fed action would help fuel growth.
Bernanke, in his Jackson Hole speech, cited a Fed study showing that large-scale asset purchases may have raised the level of economic output by almost 3 percent and boosted private payroll employment by more than 2 million jobs.