Tuesday, December 02, 2008

Even lower interest rates?

Ben Bernanke the Federal Reserve Chairman has stated that lower interest rates are "certainly feasible." The current interest rate for the Fed is 1, which has only been so low once in the past 50 years. But there's an obvious limit to how low the rate can go, 0...which it is coming closer and closer to. This could help the economy bounce back, but would unlikely be able to do it alone and would need help. Bernanke said there are other ways to help stimulate the economy and help it to recover such as buying "longer-term Treasury or agency securities on the open market in substantial quantities, he said. This might lower rates on these securities, 'thus helping to spur aggregate demand,' Bernanke said". The Fed also announced 2 plans about a week or two ago stating that it would increase the availability and lower the costs of credit card , auto, student and home loans. The Fed also said it would spend over $700 billion purchasing securities and mortgages. I've always wondered where it planned on getting all this money needed to bailout all of the businesses and people. Either way it looks like the economy will be weak well into next year.

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