The Federal Reserve looks for methods to help the economy

The Federal Reserve, the board that sets overnight loan rates for banks, is mulling possible actions to help the economy grow. Risky stimulus moves or maintaining course are the two choices being considered. When awaiting the decision that should come late Tuesday, trading has gone very slowly. Source for this article – Fed mulls possible actions to give the economy a boost by Personal Money Store.

One option accessible

The first option in front of the Federal Reserve is probably the most common – maintaining or dropping interest rates. The interest rates set by the fed are used to determine rates for every little thing from mortgages to internet loans. As the rates are so low, more would want to get some credit going. There may be some deflation though.

Federal Reserve’s second option

It is possible the Fed might just purchase government debt as an option. The Fed does have some cash on hand to offer a personnel loans to the government. Interest rates for long term items might go down with the mortgage investments. The risk, though, is that this would not stimulate any borrowing.

Federal Reserve option 3

The riskiest move, and the one with the most payoffs, would be for the Fed to start purchasing securities again. The Federal Reserve in 2009 bought $1 trillion from Fannie and Freddie in securities. Fannie and Freddie still aren’t doing well with all 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 companies. Even paycheck loans will die off with investors pulling all their money if the Fed did this admitting the economy really is in bad shape.