The Federal Open Market Committee announced a $600 billion bond purchase program, to take place now through June 2011, in an effort to stave off any threat of deflation and kick start the economy. While the program will likely succeed in avoiding deflation -- many would argue we'll avoid it anyway -- this doesn't solve our economic problems.
The Fed has taken the middle ground, with $600 billion -- an amount that is more than the $500 billion that was expected, but not the shock and awe seen in round one of quantitative easing during 2009. The Fed also stated a definitive time frame, saying the purchases will take place between now and "the end of the second quarter of 2011, a pace of about $75 billion per month." Frankly, I had expected an open-ended program that would have given the Fed the flexibility to seamlessly maintain the purchases into the future or scale back should conditions warrant. The Fed did insert the obligatory statement that they'll "adjust the program as needed," but actions speak louder than words.
The Fed may succeed in lowering rates for things like mortgages and corporate borrowing, but my skeptical eyes see a program that is more likely just to keep a lid on rates rather than bringing them appreciably lower.
The would-be consumer borrowers the Fed is aiming to reach with its latest effort are still burdened by being upside down and either living on a reduced income or being out of work entirely. And printing another $600 billion doesn't change that.