Federal Reserve launched a controversial new policy on Wednesday, committing to buy $600 billion more in government bonds by the middle of next year to breathe new life into a struggling U.S. economy.

The decision, which takes the Fed into largely uncharted waters, is aimed at further lowering borrowing costs for consumers and businesses still suffering in the aftermath of the worst recession since the Great Depression.

The U.S. central bank said it would buy about $75 billion in longer-term Treasury bonds per month. It said it would regularly review the pace and size of the program and adjust it as needed depending on the path of the recovery.

In its post-meeting statement, the Fed described the economy as “slow”, and said employers remained reluctant to add to payrolls. It said measures of inflation were “somewhat low.”

“Although the committee anticipates a gradual return to higher levels of research utilization in a context of price stability, progress toward its objectives has been disappointingly slow,” the Fed said.

The central bank repeated its vow to keep the federal funds rate on overnight loans ultra-low for an extended period. Some analysts had speculated the Fed might broaden this commitment.

Kansas City Fed President Thomas Hoenig continued his streak of dissents, saying the risk of additional securities purchases outweighed the benefits.

In a separate statement, the New York Fed said it would temporarily relax a rule limiting ownership of any particular security to 35 percent. It said holdings would be allowed to rise above that threshold “only in modest increments.”

Including the Fed’s ongoing plan to reinvest maturing assets, the New York Fed expects to conduct $850 billion to $900 billion in Treasury purchases through the end of the second quarter of 2011.

With the U.S. economy expanding at only a 2 percent annual pace in the third quarter of this year and the jobless rate seemingly stuck around 9.6 percent, the Fed had come under pressure to do more to stimulate business activity.

The central bank had already cut overnight interest rates to near zero in December 2008 and bought about $1.7 trillion in U.S. government debt and mortgage-linked bonds.

Those purchases, however, occurred when financial markets were stricken by crisis, and economists and Fed officials alike are divided over how effective the new program will be.

Further bond purchases, however, are viewed with a skeptical eye by many economists and some Fed officials.

Indeed, some worry further bond buying could do more harm than good by providing tinder for inflation that will ignite when the recovery finally gains traction.

BUY AMERICAN (BONDS)

Markets had already seen sharp moves in anticipation of a resumption of bond purchases by the Fed. U.S. stocks and government bonds have rallied, while the dollar has taken a drubbing in advance of the decision.

Stocks have also been supported by expectations — now validated — that Republicans, viewed as more pro-business by investors, would seize control of the House and pick up Senate seats in elections on Tuesday that were seen as a referendum on the economy.

Since Republicans campaigned on a platform for smaller government, Congress may be less likely to offer fresh stimulus spending if the economy sputters, leaving the Fed as the primary source of support.

With the prospect of a long period of ultra-low returns in the United States, investors have flocked to emerging markets, pushing those currencies higher. Emerging economies, worried about a loss of export competitiveness, have cried foul.

“We are all under attack by the relaxed monetary policy of the United States,” Colombian Finance Minister Juan Carlos Echeverry told investors on Tuesday.

The Bank of Japan, which meets on Thursday and Friday, is also poised to launch a new round of bond buying.

The European Central Bank and Bank of England also meet this week, but are not expected to shift policy.