WASHINGTON — The Federal Reserve opened a new chapter on Thursday in its efforts to stimulate the economy, announcing simply that it plans to buy mortgage bonds, and potentially other assets, until unemployment declines substantially.


The Fed said that it would expand its holdings of mortgage-backed securities and potentially take other steps to encourage borrowing and financial risk-taking. But perhaps more significant was the basic change in its approach: For the first time, the Fed pledged to act until the economy improved, rather than creating another program with a fixed endpoint.


In announcing the new policy, the Fed sought to make clear that its decision reflected not only an increased concern about the health of the economy, but an increased determination to respond – in effect, an acknowledgment that its approach until now had been flawed.


The Fed also acknowledged its limits. “Monetary policy, particularly in the current circumstances, cannot cure all economic ills,” the Fed chairman, Ben S. Bernanke, said at a news conference.


The Fed’s policy-making committee said in a statement that its efforts would continue for “a considerable time after the economic recovery strengthens.” Specifically, it said it would act until the outlook for the labor market improved “substantially,” although it did not offer a numerical target.


In a separate statement, the Fed said its senior officials now expected the economy to expand from 1.7 to 2 percent this year, down from their June projection of growth of 1.9 to 2.4 percent. The officials continued to predict that the unemployment rate would not fall below 8 percent.


“The weak job market should concern every American,” Mr. Bernanke said at the news conference. “The modest pace of growth continues to be inadequate to generate much improvement in the current rate of unemployment.”


Fed officials predicted that growth would be somewhat faster in coming years, and that unemployment would decline somewhat more quickly, presumably reflecting the impact of the measures the Fed announced Thursday.


“The idea is to quicken the recovery, to help the economy begin to grow quickly enough to generate new jobs and reduce the unemployment rate,” Mr. Bernanke said.


On Wall Street, traders welcomed the moves. The benchmark Standard & Poor’s 500-share index was up 1.6 percent by the close of trading. The Dow Jones industrial average also ended with a gain of 1.6 percent, or about 200 points.


The Fed’s plan went further than many investors had expected by providing an open-ended commitment. But stocks have been rising in recent weeks, partly in anticipation of the Fed taking more measures to support the economy.


“There weren’t many more accommodative options the Fed could have gone with,” said Dan Greenhaus, the chief global strategist at BTIG, an institutional broker.


In its measures, the Fed said it would add $23 billion of mortgage bonds to its portfolio by the end of September, a pace of $40 billion in purchases each month. It will then announce a new target at the end of this month, and every subsequent month, until the outlook for the labor market improves “substantially,” as long as inflation remains in check. The statement did not further explain either standard.


The Fed’s statement made clear, however, that it would continue to stimulate the economy even as the recovery strengthened, suggesting that it was now willing to tolerate somewhat higher inflation in the future to encourage growth in the present.


“A highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens,” the Fed’s policy-making committee said in its statement, issued at the end of its regular two-day meeting in Washington.