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Report: Fed Moving Closer to Stimulus Action

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July 25, 2012 by   1 Comment

Federal Reserve officials, impatient with the economy’s sluggish growth and high unemployment, are moving closer to taking new steps to spur activity and hiring.

The Wall Street Journal reported that since their June policy meeting, officials have made clear — in interviews, speeches and testimony to Congress — that they find the current state of the economy unacceptable. Many officials appear increasingly inclined to move unless they see evidence soon that activity is picking up on its own.

Amid the recent wave of disappointing economic news, conversation inside the Fed has turned more intensely toward the questions of how and when to move. Central-bank officials could take new steps at their meeting next week, July 31, and Aug. 1, though they might wait until their September meeting to accumulate more information on the pace of growth and job gains before deciding whether to act.

According to the Wall Street Journal, Fed officials could take some actions in combination or one after another. Fed Chairman Ben Bernanke, in testimony to Congress last week, listed several options under consideration, including a new program of buying mortgage-backed or Treasury securities, new commitments to keep short-term interest rates near zero beyond 2014 or an effort to push already-low benchmark short-term interest rates even lower.

Determined to keep trying to get the economy going without causing inflation, the Fed is exploring other novel measures. One mentioned by Bernanke in his testimony would be to use a facility the Fed calls its discount window to provide cheap credit directly to banks that make new business or consumer loans.

Bernanke told Congress he wants to see more progress in reducing unemployment and he expressed frustration the economy appears to be “stuck in the mud.” The Fed chairman has spoken in the past about the importance of the economy achieving what he calls “escape velocity” — growth that is fast enough to give the economy forward, self-reinforcing momentum.

 

 

 

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Comments

One Response to “Report: Fed Moving Closer to Stimulus Action”

  1. Jason on July 25th, 2012 3:31 pm

    I understand the concept of stimulating the economy, but if the government would simply make it easier to businesses to compete through tax and regulatory relief, “escape velocity”would happen in a big way.

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