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Fed to provide $600bn stimulus to US economy

Fed to purchase US government bonds at rate of $75bn a month.

The Federal Reserve on Wednesday announced that it will pump $600bn (£373bn) into the US economy by the end of June next year to kick-start a "disappointingly slow" recovery.

In the second round of Quantitative Easing, the Fed will purchase US government bonds at a rate of $75bn a month until the end of the second quarter of 2011. The Fed plans to stimulate the economy in large part by lowering mortgage and other interest rates.

QE is being widely construed as the Central Bank's last chance to get the US economy back on track by breaking free of sluggish growth.

Fed officials concluded that the growth of the US economy - at an annual rate of 2 per cent between July and September - was too slow to bring down the 9.6 per cent unemployment rate.

The stimulus is expected to encourage modest price increases in a scenario where inflation has been running too low.

Meanwhile, stock markets around the world rallied following the Fed's long-awaited decision to pump more money into the US economy even as the dollar retreated against the euro.

The Bank of England is also scheduled to announce its own decision on monetary policy at noon today.