Three months ago, the Federal Reserve stepped up with a meaningful economic intervention plan, which was effectively the third round of quantitative easing. Just as important, Fed Chairman Ben Bernanke made an "open-ended" commitment, suggesting efforts will simply continue indefinitely until the economy is in a healthier position.
Most assumed that Bernanke would simply reiterate his support for that policy in his quarterly report this afternoon. Instead, the Fed is actually going much further.
The Federal Reserve is keeping its foot hard on the economy's accelerator amid persistent high unemployment that may be sapping the confidence of consumers and businesses.
The nation's central bank announced Thursday that it would purchase longer-term Treasury securities to the tune of $45 billion per month to maintain a drive to help accelerate the sluggish economy and boost employment.
It also, for the first time, set a specific target for how long interest rates would remain at historic lows near zero percent: as long as the unemployment rate, now at around 7.9 percent, remains above 6.5 percent.
Matt Yglesias called the move "huge," adding that the FOMC "has stopped screwing around and started doing real expectations-based monetary easing."
Keep in mind, there have traditionally been two approaches Washington can take to boost the economy: fiscal measures (government investment) and monetary policy (Fed intervention). Democrats have traditionally preferred the former, Republicans the latter. However, as the Republican Party became radicalized, GOP officials began to oppose both.
I mention this because over the last two years, Bernanke has repeatedly implored Congress -- pleaded with lawmakers, really -- to do something to improve job creation and economic growth, though in each instance, Republicans have ignored his pleas. Indeed, GOP leaders have not only blown off calls for fiscal stimulus, they've in turn pressed the Fed to stop trying to make the economy better.
That means it's up to the Fed -- and only the Fed -- to give the economy a boost. Fortunately, as of today, Bernanke is approaching the task with new ambition and enthusiasm.