Fed Announces Open-Ended Bond Purchases - QE3

The Federal Reserve on Thursday announced that it is launching a new program of open-ended bond purchases, so-called QE3, saying it will buy $40 billion of agency mortgage-backed securities each month as long as the economy needs it, starting Friday.

It's also keeping in place so-called Operation Twist, which consists of swapping short-dated securities for longer-term securities, as well as reinvesting the proceeds of maturing securities, so the central bank will be adding $85 billion of long-term securities each month through the end of the year.

The Fed is also extending its plan to keep interest rates exceptionally low until at least through mid-2015. Fed funds rates are currently targeted at a rate between 0% and 0.25%.

The Fed said it's acting "to support a stronger economic recovery" and expects the new program to put downward pressure on longer-term interest rates, support mortgage markets and help make financial conditions more accommodative.

U.S. stocks added to Thursday gains after the Federal Open Market Committee announced a new round of buying mortgage-backed securities.