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. When awaiting the decision that should come late Tuesday, trading has gone very slowly. Resource for this article – Fed mulls possible actions to give the economy a boost by Personal Money Store.
Possible first option for Fed
Maintaining or dropping interest rates is the first Federal Reserve option. All interest rates are determined by the Fed. Credit would be encouraged with the lowest rates in history. The risk, however, is that deflation could stifle no matter what gains could be made.
Fed’s second option
The second option the Fed has in trying to stimulate the economy is purchasing government debt. The Fed does have some cash on hand to offer a personal loans to the government. There were mortgage investments that made this income which might make long term interest rates go down a bit. No borrowing would be stimulated with this plan.
Federal Reserve’s 3rd option
The Fed could purchase securities again also. The Federal Reserve in 2009 bought $1 trillion from Fannie and Freddie in securities. Fannie and Freddie still aren’t doing well with all of this help that did encourage lending. Any large purchase would help guarantee any of this debt and (theoretically) increase the amount of money lent out by businesses. The only problem is the Fed would be admitting the economy is really bad with this move, meaning investors wouldn’t even want paydayloans anymore.
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