Fed Takes Strong Measures to Boost American Economy

The Federal Reserve has acted aggressively to stimulate the flagging U.S. economy by expanding a bond purchase program and extending its promise to keep interest rates extremely low by six months until at least mid-2015.

The key overnight bank lending rate has been in a range of zero to 0.25% since December 2008. The Fed has added a new pledge to keep rates near zero even after the economy rebounds.

The central bank plans to buy $40 billion of mortgage-backed securities per month and to continue the program until the job market improves. The move aims to spur mortgage lending as the housing market shows signs of perking up.

The Fed also extended through year-end its commitment to buy $45 billion of U.S. Treasury securities monthly. Economists expect the central bank to renew the program in 2013 if the economy hasn't revived.

Fed Chairman Ben Bernanke says the central bank acted because it no longer expects the economy to grow fast enough to make a dent in the country's 8.1% unemployment rate. Bernanke says the Fed will remain vigilant that its efforts don't reignite inflation an outcome he considers unlikely.

Worldwide stock and bond markets rallied on the Fed news as investor's economic confidence rose.