It's Official: Here's the Fed's Major Announcement (QE3 Is Here!)

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The Federal Reserve announced Thursday that it will spend $40 billion a month to buy mortgage-backed securities for long as necessary to stimulate the economy and reduce high unemployment.

"If the outlook for the labor market does not improve substantially, the committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability," the Fed said in a statement released after the meeting.

You know what this means, right? It means the Fed has just introduced a third round of unlimited, open-ended quantitative easing.

Because the other two worked so well, right?

"The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions," the statement added.

The Fed also announced it would continue to sell shorter-dated government debt and buy longer-term securities, meaning the it's keeping "Operation Twist" in place.

"These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative," the statement continued.

The statement was approved on an 11-1 vote. The lone dissenter was Richmond Fed President Jeffrey Lacker, who worries about igniting inflation.

The Dow Jones industrial average was up 15 points for the day just before the announcement at 12:30 p.m. Eastern time. It had surged 105 points within minutes of the announcement, then gave up some gains to be just 35 points higher.

The dollar dropped against major currencies, and the price of gold shot up about $16 an ounce, roughly 1 percent, to $1,750.

GLD quote as of 1:17 pm EST

“The Fed has now confirmed it is merely a sad, political, self-frontrunning caricature of what a central bank should be," the site Zero Hedge said in response to the news.

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This story has been updated. The AP contributed to this story.