The US Federal Reserve will keep interest rates at close to zero until unemployment falls below 6.5 per cent in a historic change to monetary policy.
It is the first time a large central bank has ever tied its interest rate policy directly to the state of the economy. The Fed said it would keep rates low as long as it does not forecast inflation above 2.5 per cent.
The Fed also beefed up its third round of quantitative easing to $85bn a month – adding $45bn of Treasury purchases to its commitment to buy $40bn of mortgage-backed securities each month – and said it would keep buying until there was a substantial improvement in the labour market.