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Federal Reserve launches QE3

The Federal Reserve plans to release more stimulus as a third attempt to provide relief for the U.S. economy. The stimulus, referred to as the quantitative easing plan or QE3, includes buying $40 billion in mortgage-backed securities each month for an undetermined time length based on the strength of the economy.

The Fed began purchases today, and are expected to add up to only $23 billion for the remainder of September. The Fed will continue its Operation Twist policy, and both policies combined will add $85 billion in long-term bonds each month. Also indicated, the Fed plans to keep short-term interest rates at low levels until mid-2015.

Following the financial crisis, bankers are sitting on $1.6 trillion in reserves and tight credit standards. The central bank's main objective is to lower interest and mortgage rates with hopes that will boost spending and employment.

Unemployment rate has remained above 8 percent, but government jobs report indicated fewer hiring and smaller labor force in August. As support to QE3, the Fed will "emply its other policy tools" if the job market does not drastically improve.

Within the past three years, the first two attempts of quantitative easing dropped interest rates and helped stock market gains. Economists are unsure of the risks, but expect QE3's benefits to be minor. As stated by Bernanke, the Fed is turning to policymakers in other areas to help ensure unemployment and other economical problem areas improve.

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