Ben Bernanke promises to buy bonds until US jobs market improves

The “whatever it takes” mantra is becoming the latest catch-cry of the world’s most powerful bankers.

Last week we had the European Central Bank promising it would buy an unlimited number of bonds until the euro is saved.

Overnight, US Federal Reserve head Ben Bernanke announced a fresh round of bond buying that will not stop until the unemployment situation in the US improves.

The Fed has committed to buying $US40 billion of mortgage-backed securities per month – until it doesn’t need to any more.

“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.”

The Fed also said that “a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens”.

Obviously there is good and bad in an announcement like this.

Markets around the world will be cheered that the Fed is prepared to keep buying bonds (which is essentially printing money) to spark some more life in the US economy. Commentators in the US have been calling for a new round of “quantitative easing” for months now and what they’ve got is a highly unusual, open-ended program from the Fed.

As economist and Business Spectator columnist Stephen Koukoulas puts it this morning: “Ben Bernanke has delivered not only QE3, but simultaneously unleashed QE4, QE5 and QE6. This is QE with no end or rather an end only when the economy improves.”

Of course, the fact that Bernanke has been forced to undertake a program of this size and scope suggests that the US economy is very much stuck in a slow gear and any acceleration could be a fair way away.

Still, it’s action that drives community. And this is serious and in some ways surprising action.