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 are trading slowly, waiting for the Fed to announce its decision, which is expected late Tuesday.
One option available
The first option in front of the Federal Reserve is one of the most common – maintaining or dropping interest rates. The Federal Reserve determines all of the interest made on online cash loans. By keeping these rates at their current historic lows or dropping them, the Fed would be encouraging the use of credit. There could be some deflation though.
Federal Reserve option two
The second option the Fed has in trying to stimulate the economy is purchasing government debt. A personal loan could possibly be given to the government. Interest rates for long term items might go down with the mortgage investments. Through this, there would be no borrowing encouraged.
Federal Reserve’s third option
The Fed could purchase securities again also. Securities were bought by the Fed from Fannie and Freddie for about $1 trillion in 2009. Though this helped encourage lending, Fannie and Freddie are still in trouble. When buying large things, borrowing would be guaranteed making it possible for companies to be lent more money. The only problem is the Fed would be admitting the economy is really bad with this move, meaning investors wouldn’t even want pay day loans anymore.
