Federal Reserve announces purchase of $40 billion in bonds a month to boost week economy

POSTED: Thursday, September 13, 2012 - 5:00pm

UPDATED: Thursday, September 13, 2012 - 5:05pm

The Federal Reserve has promised $40 billion a month to jump start the economy.

They're hoping a plan to buy bonds will translate into more jobs across the country.

Stocks shot up within minutes of the Fed's announcement of its plan to stimulate a slow-growing economy by making it cheaper for businesses to borrow and spend.

Federal Reserve Chairman Ben Bernanke is hoping this positive reaction on Wall Street will trickle down to the unemployed as well.

"While the economy appears to be on a path to moderate recovery, it isn't growing fast enough to make significant progress reducing the unemployment rate," he admitted.

Job seekers were hit by disappointing numbers in August.

Just 96,000 jobs were added, 45,000 less than in July and well under the 200,000 needed each month needed to significantly lower unemployment.

"This is a Main Street policy, because what we are trying to do is get jobs going," Bernanke said.

The federal reserve will buy $40 billion worth of mortgage debt a month, indefinitely, and extend protections, keeping interest rates low.

Financial experts and lawmakers are leery.

They're warning of unintended consequences, like rising costs for goods and services.

The Fed has already bought about $2 trillion in bonds and mortgage backed securities since 2008.

This move indicates that price tag is going to continue to climb until the Fed see steady recovery.

Comments News Comments

Post new Comment