The Federal Reserve has unleashed a third round of quantitative easing (QE) to support the US economy following a wave of poor data and a weakening labour market.
The Federal Open Market Committee (FOMC) has agreed to an open-ended QE programme which will see it buy additional mortgage-backed securities at a rate of $40bn per month.
The new purchases combined with the efforts of Operation Twist - another programme designed to boost the nation's economy - will see the Fed buy some $85bn a month of bonds up to the end of the year.
This latest action should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, it said in a statement.
It also said the target range for the federal funds rate will remain "exceptionally low" until at least mid-2015.
The FOMC added it will conduct further easing as required: "If the outlook for the labour market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability."
Growth in US employment has been slow, the Committee said, while the unemployment rate remains elevated, and inflation has been subdued.
"The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labour market conditions.
"Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely would run at or below its 2% objective.
"To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40bn per month," it said.
"The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities."
US equity markets rose following the announcement, with the S&P 500 0.64% higher at 1,445 and the Dow up 0.63% at 13,417.
Last week Goldman Sachs predicted Bernanke would unveil a fresh round of QE after jobs data for August disappointed.
The US economy added 96,000 jobs over the month, undershooting economists’ expectations of 130,000 new jobs. The August figure was accompanied by downwards revisions to both June and July's additions, from 64,000 to 45,000 and from 163,000 to 141,000 respectively.
The unemployment rate took a surprise dip from 8.3% to 8.1%, largely down to more people dropping out of the workforce.
Capital Economics' chief US economist Paul Ashworth said last week "no progress has been made in reducing labour market slack over the past year”, increasing the likelihood the Fed would step in to offer further support to the economy.
Bernanke had offered several clues indicating the door to QE3 remained open.
The minutes of the last Federal Open Market Committee (FOMC) meeting stated: "Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery."
During his last Jackson Hole speech, the chairman said the state of the economy was still "far from satisfactory", adding he had "grave concerns" about the labour market.
'Managed separation update'
The chairman discusses his surprise holiday job
Three months on
Regulator has stepped in