Printing more money

Saying that the recession continues to deepen, the Federal Reserve announced that it would purchase an additional $750 billion worth of government-guaranteed mortgage-backed securities, on top of the $500 billion that it is in the process of buying. The Fed also said it would buy up to $300 billion worth of Treasury securities over the next six months. Stocks rose sharply on the news, but they're now pulling back. In the bond market, prices rose and yields fell. From the NYT:

In a sign that it is even more worried than at its last meeting in January, the Fed said on Wednesday that it would keep its benchmark rate, the federal funds rate, at virtually zero for “an extended period.” While the central bank had said for some time that it was considering the possibility of buying longer-term Treasury bonds, Fed officials had played down that idea in the past month as they focused their attention instead on more targeted intervention in the credit markets. In their statement on Wednesday, however, the Fed policy makers offered little explanation for the decision to go ahead with the Treasury purchases after all, saying only that the move was intended to “improve conditions in private credit markets.”