The US Federal Reserve has largely met market expectations for its second and historic round of spending.
It said in a statement issued just after 5 am today, after the two day meeting in Washington, that it will spend $US600 billion over the next eight months, and topping it up to close to $US1 trillion by reinvesting the proceeds of maturing existing debt holdings.
The Fed has already spent $US1.7 trillion in a first round of easing from the end of 2008, a move that at least steadied the slumping economy and prevented a wholesale collapse.
But the recovery has been fitful and weak, restrained by high unemployment, little bank lending and companies unwilling to spend some of their record cash hoard on new investment and jobs.
The news saw shares rise, bond yields rise as they were sold off and currencies move slightly while traders assessed the impact.
The Australian dollar rose over parity and was trading around $US1.0024 at 7 am.
Gold fell $US16 an ounce to $US1340 an ounce in New York, copper fell 2.9C to $US3.81, but oil edged higher.
The Fed said in its statement:
"To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings.
"In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.
"The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability."
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Its latest assessment of the health of the US economy was full of negatives;
"Information received since the Federal Open Market Committee met in September confirms that the pace of recovery in output and employment continues to be slow.
"Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.
"Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak.
"Employers remain reluctant to add to payrolls. Housing starts continue to be depressed.
"Longer-term inflation expectations have remained stable, but measures of underlying inflation have trended lower in recent quarters.
"Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate (to promote employment and price stability).
"Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.
"The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.
"The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate. "
It’s going to be tough.
