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Early reactions to the Fed’s QE3 announcement

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Yesterday, Ben Bernanke announced the Federal Reserve is going to do another round of what’s called “quantitative easing.”  The Fed will buy $40 billion worth of mortgage-backed securities every month until Bernanke and his colleagues are satisfied the job market — and the economy — have improved.

The main focus of the action is, of course, the housing sector. By buying mortgage-backed securities, the Fed hopes to drive down interest rates and encourage more Americans to buy and build homes, as well as refinance. Despite some signs of recovery, economists say the Fed realizes that the housing market is still a big problem in the U.S. economy.

So far, there is no set end date to the Fed’s new program. Economists see this as a relatively strong message from the Federal Reserve.

“We’re going to be there, and do more, as long as it takes, to get the unemployment rate down,” as Ellen Zentner, senior economist at Nomura Securities, puts it.

Part of the job of the Federal Reserve is to achieve maximum employment in this country. But after yesterday’s statement, many are wondering what the Fed’s goal is when it comes to knocking down the relatively high unemployment numbers.

“It could be seven [percent]; it could be six; it could be somewhere in between,” says Ken Kuttner, who teaches economics at Williams College. “Eventually, where this ends up, is not really known.”

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