Fed Mulls Possible Actions To Give The Economy A Boost

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The Federal Reserve is trying to think of ways to help the economy. These changes might be as simple as maintaining course, or as aggressive as risky stimulus moves. Late Tuesday is when the decision might be made, although trading has been slow.

Fed Reserve option one

The first option in front of the Federal Reserve is the most common – maintaining or dropping interest rates. The interest rates set by the fed are used to determine rates for everything from mortgages to online personal loan. By keeping these rates at their current historic lows or dropping them, the Fed would be encouraging the use of credit. The risk, nevertheless, is that deflation could stifle whatever gains may be made.

Next option the Federal Reserve is looking into

The second option the Federal Reserve has in trying to stimulate the economy is purchasing government debt. The government could use a personnel loans from the Federal Reserve. Interest rates for long term items might go down with the mortgage investments. The risk, though, is that this would not stimulate any borrowing.

Option 3 for the Fed

It is also possible the Federal Reserve could purchase securities once again, which can be considered a very risky move. The Federal Reserve in 2009 bought $1 trillion from Fannie and Freddie in securities. Though this helped encourage lending, Fannie and Freddie are still in trouble. When getting large things, borrowing would be guaranteed making it possible for companies to be lent more money. The only problem is the Federal Reserve would be admitting the economy is really bad with this move, meaning investors wouldn’t even want payroll loans anymore.

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