The Fed announcement:Risk assets were boosted overnight after...

The Fed announcement:

Risk assets were boosted overnight after the FOMC announced a new Large Scale Asset Program (LSAP, aka QE3). The Fed will purchase agency mortgage-backed securities (MBS) at a pace of USD40bn per month for an open ended period. Combined with the continuation of ‘Operation Twist’, this will increase the FOMC’s holdings of longer-term securities by USD85bn per month through to the end of December 2012. The Fed is quite aggressive in the fact that until it sees a substantial improvement in labour market conditions, then it is committed to continuing its purchases of MBS and may even “undertake additional purchases and employ other policy tools” until it is satisfied such improvement is achieved. The FOMC also extended its long-term guidance regarding the period for which the policy rate will be left unchanged, to “at least through mid-2015” rather than late 2014. The Fed also modestly upgraded its growth forecasts.

CK