The Federal Reserve, the board that sets overnight loan rates for banks, is mulling possible actions to help the economy grow. They might maintain course or even go as drastic as making stimulus moves that are risky. Markets around the world have been trading slowly, waiting for the Fed to announce its decision, which is expected late Tuesday.
Federal Reserve has one possible option
Maintaining or dropping interest rates is the first Federal Reserve option. The Federal Reserve determines all of the interest made on online loans. By keeping these rates at their current historic lows or dropping them, the Fed would be encouraging the use of credit. The risk, however, is that deflation could stifle no matter what gains may be made.
Next option the Federal Reserve is looking into
Purchasing government debt is an additional possible option. A personal cash loan might be given 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.
3rd Fed option
The riskiest move, and the one with the most payoffs, would be for the Fed to start purchasing securities again. Securities were bought by the Fed from Fannie and Freddie for about $1 trillion in 2009. Even though lending was encouraged, Fannie and Freddie nevertheless aren’t doing well. When buying large things, borrowing would be guaranteed making it possible for businesses to be lent more money. Even paydayloans will die off with investors pulling all their money if the Fed did this admitting the economy really is in bad shape.
