For the first time, the Federal Reserve on Thursday pledged aggressive aid for the economy until more Americans find jobs.
Policymakers -- with one vote of dissent -- vowed to buy bonds to hold down interest rates and use other policy tools so long as "the outlook for the labor market does not improve substantially," the Fed's announcement said.
"It's a Main Street policy. What we're about here is trying to get jobs going," Federal Reserve Chairman Ben Bernanke said at a news conference following the extensive policy announcements.
Previous Fed announcements have defined what the central bank planned to do to help the economy generally. For example, it would announce that it was lowering key interest rates outright or would buy several hundred billion dollars of bonds over a specific number of months.
On Thursday, the Fed said that its new commitment -- to buy $40 billion of mortgage bonds each month -- would persist until the job market showed sustained strength.
That commitment to a better job market exceeded most economists' expectations of what the presidentially appointed Fed governors and regional Federal Reserve bank presidents could agree to do.
Stock prices jumped on the Fed's policy moves. The Dow Jones industrial average gained 206.51 points, or 1.6 percent, to close at 13,539.86.
Experts had expected less from the Fed, in part because some Fed policy committee members -- including Kansas City Fed President Esther George -- publicly had questioned how much the Fed could help and how much an aggressive new round of action could increase future economic risks.
Bernanke acknowledged those doubts and the limit on the Fed's ability to lower the nation's 8.1 percent unemployment rate by itself.
"I personally don't think it's going to solve the problem," Bernanke said, a point he made several times.
He repeated previous pleas for Washington lawmakers to address the pending jump in taxes and drop in government spending set to begin on Jan. 1, which is generally described as a fiscal cliff. He has said the cliff, if allowed to play out, could send the economy back into a recession.
"I don't think our tools are strong enough to offset a major fiscal shock," Bernanke said.
But, he said, the Fed has tools that can support the recovery and feels compelled to use them.
Help for housing
The central bank's key new program specifically aims to help the housing industry, which has seen some improvement over its devastated levels during the recession.
The Fed said it would buy $40 billion of securities backed by mortgages every month and keep buying essentially until the job market showed sustained strength.
Buying the mortgage securities should help lower mortgage rates, which would make it easier and cheaper to refinance a mortgage or buy a new house. Indirectly, that could mean more home construction, higher house prices and more confident consumers -- and that could mean jobs.
Other steps the Fed is taking help lower corporate bond rates, too, which makes business expansion cheaper and more likely. Again, that could mean more jobs.
How many jobs, and at what risks, are open to much debate inside and outside the Fed.
Kansas City's George, for example, questioned in a speech last month whether anyone had held off buying a house or hiring a new employee because interest rates weren't quite low enough.
