Feds set to discuss ways to lift the economy

Feds set to discuss ways to lift the economy

The Federal Reserve would be holding a meeting on Tuesday to discuss the necessity of implementing additional steps to revive the faltering economy, but will likely delay making major decisions until the end of the year.

It will be the last meeting of the Federal Open Market Committee before the Congressional mid-term elections, and given that the central bank has historically distanced itself from political exercises, and the with the latest economic figures rather mixed, the Fed will likely postpone on deciding whether to resume buying large-scale Treasury securities to force record-low interest rates even lower.

The Fed made an important step last month toward fresh stimulus when it decided to utilize money from mortgage-backed securities to purchase long-term Treasury debt.

Although not a far-reaching decision, it raised the possibility that the central bank would revive that strategy which is also called called quantitative easing.

The aim of such a strategy is to apply downward pressure on long-term interest rates. The Fed has already set short-term rates, over which it has more control, at nearly zero since the end of 2008.

Last month, Fed chairman Ben S. Bernanke said he was ready to take additional steps to prevent the U.S. economy from falling into deflation, which is a prolonged time of falling prices like what happened to Japan beginning in the early 1990s.

The Fed says that deflation is a remote scenario, but it is still anxious because inflation is only at about the targeted level of roughly 2 percent, while the unemployment rate is at 9.6 percent.

Posted by EmpoweredNews on Monday September 20 2010, 9:08 AM EST. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0