The Fed had already been buying $45 billion in Treasury bonds and $40 billion in mortgage bonds per month. But the Treasury purchases were set to end this month, and that could have sent a confusing message to the markets at a time when the Fed wanted to signal that it was promoting growth. So the Fed is continuing the purchases.
The actions followed significant new commitments made earlier in the fall, when the Fed said it would seek to bolster the economy even after the recovery began to strengthen.
The Fed’s transformation
In embracing specific economic targets for unemployment and inflation, the Fed is reflecting a transformation in how it has approached its job under Bernanke.
Traditionally, the central bank has offered very little public information about how it planned to intervene in the market. Since taking the helm, Bernanke has pushed officials to allow the central bank to be more open.