The Federal Reserve launched another aggressive stimulus programme on Thursday, saying it will buy $40 billion of mortgage-related debt per month until the outlook for jobs improves substantially as long as inflation remains contained.
In a significant shift in the direction of US monetary policy, the Fed's policymaking committee tied its unconventional bond buying directly to economic conditions, a move that is likely to be controversial among central bank critics.
"If the outlook for the labour market does not improve substantially, the committee will continue its purchase of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability," the Fed said in a statement.
In an additional step that reflects just how concerned Fed officials have become about the health of the economy, policymakers said they would not likely raise rates from current rock-bottom lows until at least mid-2015. Previously, it had set such guidance at late 2014.
US stocks added to gains on the Fed's move, the dollar fell broadly and gold hit a six-month high. However, bond prices dropped, pushing yields higher as investors were seemingly underwhelmed by the pace of purchases. Oil prices also slipped.
"They are definitely stepping up," William Larkin, fixed income portfolio manager at Cabot Money Management in Salem, Massachusetts, said of the central bank's decision.
"The problem is there is a decay in monetary policy. We are already at extreme levels, so basically if I make the new mortgage rates 20 basis points cheaper you don't get the bang for the buck," he added.
The decision comes in the face of widespread questions about the likely effectiveness of a further foray into unorthodox monetary policy, including from Republican presidential candidate and former governor Mitt Romney.
The Fed said fresh MBS purchases, which it will start on Friday, would come on top of its so-called Operation Twist programme, in which it is selling short-term bonds to buy longer-term Treasury debt.