The Federal Reserve has announced bold, open-ended steps to stimulate the US economy and reduce high unemployment, saying it will spend $US40 billion ($A38 billion) a month to buy mortgage-backed securities for as long as necessary.
The Dow Jones industrial average shot up almost 240 points in response.
The central bank also extended a plan to keep short-term interest rates at record lows - close to zero - until mid-2015, or six months longer than it had planned. And it said it's ready to take other steps even after the economy improves under a "highly accommodative stance of monetary policy".
"The idea is to quicken the recovery," Fed chairman Ben Bernanke later told a news conference.
But he made it clear he thinks the economy will need the Fed's intervention even after the recovery strengthens, saying the country's employment situation "remains a grave concern".
A new Fed forecast said it thinks unemployment, now at 8.1 per cent, won't fall below 8.0 per cent this year.
Thursday's actions pointed to how sluggish the US economy remains more than three years after the Great Recession ended. The Fed's policy committee announced the aggressive actions after a two-day meeting.
With less than eight weeks left until the presidential election, the economy is the top issue on most voters' minds.
A spokeswoman for Mitt Romney's presidential campaign said the Fed's latest efforts to boost the economy are "further confirmation that President Obama's policies have not worked".
Asked whether the Fed considered the impact of its actions on the election, Bernanke said: "We make our decisions based entirely on the state of the economy ... We just don't take those factors into account."
Bernanke said the Fed does not have a specific economic target for its new stimulus program. "We are looking for ongoing sustained improvement in the labour market," he said. "There's not a specific number in mind. But what we've seen in the last six months isn't it."
The Fed also lowered its outlook, saying it now expects growth to be no stronger than 2.0 per cent this year. That's down from its forecast of 2.4 per cent in June. But it expects growth to accelerate next year to as much as 3.0 per cent.
The Fed's actions come a week after the European Central Bank announced its most ambitious plan yet to ease Europe's financial crisis by buying unlimited amounts of government bonds to help countries manage their debts.
The US bond purchases announced on Thursday are intended to lower long-term interest rates to spur borrowing and spending. But some economists said they thought the benefit to the economy would be slight.
"We doubt it will be enough to get the economy on the right track," said Paul Ashworth, an economist at Capital Economics. "It's only a matter of time before speculation begins as to when the Fed will raise its purchases from $US40 billion a month."