The Fed's historic bid to lower the jobless rate

The central bank just made a massive commitment to rejuvenating the labor market. Congress, on the other hand, is essentially MIA

Ben Bernanke
(Image credit: Chip Somodevilla/Getty Images)

The Federal Reserve has come a long way since the days of former Chairman Alan Greenspan, who used to be an expert practitioner of Fedspeak, a dialect (only remotely related to English) that befuddles mere mortals with its utter inscrutability. His successor, Ben Bernanke, has pledged to make the Fed's intentions more transparent, and on Wednesday he made good on that promise, with the central bank announcing that it would keep its benchmark interest rate target at ultra-low levels until the unemployment rate dropped below 6.5 percent or the inflation rate topped 2.5 percent. It is the first time in history that the Fed has spelled out such a specific target, rolling back decades of conventional wisdom that said the Fed was far too influential to ever fully reveal its thinking to markets.

The Fed also said it would continue an open-ended plan to purchase $40 billion worth of mortgage-backed securities a month. In addition, the central bank will buy $45 billion worth of Treasuries a month, replacing a program in which it switched out short-term government bonds for long-term ones. Taken together, the Fed's policies are intended to ease the cost of borrowing and encourage economic activity — with the ultimate goal of lowering the stubbornly high unemployment rate, which is currently at 7.7 percent.

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Ryu Spaeth

Ryu Spaeth is deputy editor at TheWeek.com. Follow him on Twitter.