Two years after our government announced the end of our nation’s recession Federal Reserve Chairman Ben Bernanke announced Wednesday that the Reserve is ready to provide more economic relief if the market’s slump continues.
After warning Congress in his semi-annual report of serious financial crisis in months and years to come if they did not raise the national borrowing limit by August 2 Bernanke outlined three ways in which the Federal Reserves plans to provide an economic stimulus that would hopefully avoid such a crisis.
Possible stimulus possibilities include 1) Treasury bond purchases, 2) Cutting the interest paid to banks on the reserves they hold as a way to encourage them to lend more, and 3) Communicating in more explicit terms how long it planned to keep rates at record-low levels. That would give investors confidence about the Fed's efforts to continue supporting the economy.
Mr. Paul Ashworth, chief U.S. economist at Capital Economics, stated that the Fed would likely hold off on further steps unless deflation emerges as a threat again. Ashworth went on to say the decision would most likely not come until next year.