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By Greg Robb, MarketWatch

WASHINGTON (MarketWatch) — The Federal Reserve pledged on Wednesday to start a controversial new $600 billion bond-buying spree to rescue the economy from its current doldrums.

The Federal Open Market Committee of the central bank said it would buy up to $600 billion in long-term Treasurys until the end of June 2011, including about $75 billion this month, in a strategy called quantitative easing. It also indicated it would spend roughly $35 billion a month reinvesting the proceeds of maturing mortgage-backed securities into government bonds.

This is the second time the Fed has engaged in quantitative easing, as it snapped up $1.7 trillion in mostly housing-related assets between December 2008 and March 2010.

The $600 billion purchase plan is slightly above the $500 billion expected by the market. See text of FOMC statement.

But the length of the program and the average purchase rate was on the low end of estimates.

“They did as little as they could get away with,” said Bill Cheney, John Hancock chief economist, who said he was looking for purchases of about $100 billion per month.

Cheney said this might reflect internal Fed politics. Many FOMC members spoke against quantitative easing in the past few weeks.

Markets gyrated in the aftermath of the move, with the Dow Jones Industrial Average(DJIA 11,215, +26.41, +0.24%)  in positive territory in late afternoon trade. See Market Snapshot.

The Fed’s new move comes because the central bank is disappointed with the slow pace of growth and worried that the high 9.6% rate of unemployment might put enough downward pressure on inflation to tip the economy into deflation or a period of a sustained drop in prices.

In its statement, the Fed noted that it has a dual mandate from Congress to foster maximum employment and price stability. “Currently, the employment rate is elevated and measures of underlying inflation are somewhat low,” to the levels that the Fed shoots for to meet these goals.

The Fed purchases are designed to bring down yields on government bonds believing that lower rates could always give the recovery a boost.

More broadly, the Federal Reserve wants to prompt private businesses and investors to begin to act with more confidence and help get the economy’s juices flowing.

“They are trying to break through the fear,” said J.P. Morgan Chase economist James Glassman.

Doubts persist about whether the plan will work, but many feel the Fed had little choice but to act.

The Fed’s favorite policy tool, the target federal funds rate for interbank lending, has been about as low as it can go, in a range between zero and 0.25%, since December 2008.