Fed announces bond-buying stimulus to spur economic growth The Federal Reserve said in a statement it stood ready to take further action if the economic situation deteriorated further. Photograph: Richard Drew/AP Federal Reserve chairman Ben Bernanke pledged to keep injecting money into the US economy until it recovers Thursday as it announced a rolling program to buy $40bn a month in mortgage-backed securities. The widely anticipated third round of quantitative easing - dubbed QE3 - comes after Fed chairman Ben Bernanke had said he was increasingly concerned about the recovery. Bernanke said the plan was aimed at reviving the jobs market by stimulating the still troubled housing market. "This is a Main Street policy because what we're about here are jobs," he said at a press conference. He said the Fed stood ready to take more action if the situation deteriorated further and that the he would not "rush to tighten policy" even when signs of a stronger recovery emerge. Wall Street cheered the move, with the Dow Jones Industrial Average soaring over 200 points. Gus Faucher, senior economist with PNC Bank, said the open-ended nature of the mortgage bond buying scheme - a marked break from previous QE efforts - sent a clear signal that the Fed was committed to propping up the US recovery. "It was much more aggressive than we were expecting," he said. Bernanke clearly feels that the recovery in the jobs market just isn't there. On top of the new scheme, the Fed said it would continue its action to bring down long-term interest rates, dubbed "Operation Twist," through the end of this year. Together the schemes will pump $85bn a month into the US economy. Bernanke said there were signs of recovery in the housing market and in the wider economy, but the Fed feels the economy is not yet strong enough to go it alone. His move so close to the election is likely to draw fire from Republican critics, though a response to the announcement from presidential candidate Mitt Romney was notable by its absence. The open-ended nature of QE3 will infuriate those who already argue Bernanke is too interventionist. But Faucher said that if the latest stimulus program had been given an expiration date, investors would once again have been asking what comes next. He's done this twice already. This is a way of saying we are sticking with it," he said. The Fed chairman refused to be drawn on precisely what signs would have to emerge before he turns off the spigot. We are looking for ongoing, sustained improvement in the labor market. There isn't a specific number in mind but what we've seen in the last six months isn't it," he said. The statement came after clear signals from Bernanke that he was preparing to act. The economy was "far from satisfactory" and the continuing high rate of unemployment threatened to "wreak structural damage," Bernanke said in a speech at the high-powered annual economic summit of the Federal Reserve Bank of Kansas City last month. Since that speech, the economic situation appears to have deteriorated. In August, the US added just 61,000 new jobs, half what many economists had been expecting. The unemployment rate ticked down from 8.3% to 8.1% but was driven down not by hiring but by 368,000 Americans leaving the labor force. Worrying economic news has continued to emerge since the job's report. On Thursday more evidence of a weakening global economy emerged as the Organization for Economic Co-operation and Development issued its latest report. The OECD found indications of slower growth in the US, Japan, China, India and Russia among others. The Fed chairman warned that the US still faced "headwinds" most notably the so-called fiscal cliff, a year end deadline for the expiration of Bush-era tax cuts and the imposition of massive spending cuts. Unless a political solution is found to the fiscal cliff, the US could be plunged back into recession, according to the Congressional Budget Office. He said the uncertainty over the fiscal cliff had been a major topic of conversation among the Fed's committee members and that uncertainty was a drag on the economy. "A lot of businesses are waiting to see whether that problem will be resolved and if so how," he said. Bernanke's actions are likely to spark a furious backlash from some members of the Republican party, who have criticised his past interventions. The Fed chairman has become a whipping boy for the right, and Paul Ryan, Mitt Romney's vice-presidential pick, has clearly stated he is against more stimulus. "I'm not a fan of more stimulus or more easing," Ryan said last month in a CNBC interview. The benefits are clearly outweighed by the long-term costs of this. Iit's not working, and all this loose money from the Fed is basically bailing out the fact that President Obama has failed on fiscal policy. All but one of the Fed's committee, Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, voted for the new stimulus package.