Fed pumps $600 billion into US economy

The Federal Reserve is to pump a further $600 billion (£370 billion) into the economy in the next eight months in a bid to bolster a recovery in the American economy.

The Fed was expected to inject $500 billion in this latest round of quantitative easing (QE) having already injected $1.75 trillion into the economy.

“Investors should feel more confident that the recovery will continue”

Rupert Watson

By the end of June next year, the Fed expects to have bought $850 billion to $900 billion of treasuries. This will be done at a rate of $110 billion a month, $75 billion of which will be QE.

Rupert Watson, the head of asset allocation at Skandia Investment Group, says: “The additional QE by the Fed will not in itself provide a substantial boost to the economy, which seems in any event to be recovering. However, it does underline that the Fed is willing to act on any sign of weakness. As a result investors should feel more confident that the recovery will continue.” (article continues below)

The news has been well received in markets, with the FTSE 100 up 1.62% in early trades. At 8.22am GMT the blue chip index stood at 5842.34.

The Dow Jones was up 0.24% at close.