Mortgage rates USA today

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The new program, called "The Twist, " after a similar '60s-era program, means the Fed will sell its holdings of short-term Treasuries to finance its purchases on long-term notes and bonds.

"This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative, " the Fed said in its statement Wednesday.

Other actions:

•The key fed funds rate will remain between 0% and 0.25%, probably through June 2013.

•The Fed will also buy mortgage-backed securities to keep mortgage rates low.

In its statement, the Fed painted a picture of a barely growing economy: high unemployment, depressed housing, low household spending. The Fed said unemployment will only shrink slowly.

The Dow Jones industrial average plunged 284 points, or 2.5%, to 11, 125, after the announcement. The bellwether 10-year Treasury note yield fell to 1.86%. The dollar rallied against the euro and the yen.

Savers could see a very modest increase in short-term rates as the Fed sells off its short-term securities to buy long-term ones.

The Fed's action showed it was unmoved by a letter sent Monday to Fed Chairman Ben Bernanke from four congressional Republican leaders that urged the Fed not to further stimulate the economy.

"Such steps may erode the already weakened U.S. dollar or promote more borrowing by overleveraged consumers, " said the letter, which was signed by Senate Republican leader Mitch McConnell, Senate Republican Whip Jon Kyl, House Speaker John Boehner and House Majority Leader Eric Cantor.

The letter is unprecedented in recent times. "It's in our country's long-term best interest to have an independent central bank, not one seen as kowtowing to the president or Congress, " Vitner says.