The Government May Actually Be Leaving The Free Market
Well?maybe not, but it looks like the Federal Reserve may be stopping any new efforts to ?revive the economy? at its meeting this week. According to economists, Chairman Ben Bernanke and his colleagues do not wish to exaggerate the stimulus medication and that ?motivating the economy? through the Fed may fan the flames of inflation later, so the Fed is expected not to make any new moves this week.
During the past year, the Fed has done everything it could do to try to help stimulate the economy including putting $1.2 trillion into the financial system in an effort to reduce interest rates. The lesser interest rates were meant to get shopper spending up.
The Fed is also anticipated to keep the key lending rate to banks at the history low of practically zero percent. It has alleged in the past that it will hold the rate low for ?an extended period.? Economists believe that the rate will stay between 0 and 25% until sometime next year.
It is appearing to be more and more like some of the things that the government has done to help the economy has had a bit of an effect?after all it was just in January at which time the primary stimulus was approved and took effect. Ever since that time, home prices have stopped going down as quickly and are really starting to settle down in a lot of places, and in the last month, customer spending has amplified and the jobless rate has also began to decelerate. A number of analysts feel that the financial system is going down, but at a much less significant rate than the concluding quarter of 2008. The April-June quarter is stuck between a 1 and 3% fall, while the closing quarter of 2008 was 6.3%.
Certainly, some of the difficulty is that we will not identify whether the economy would have recovered as rapidly without the government interfering as much. A lot of the government agencies we currently have in place were put in place to keep a depression like the one seen in 1929 from happening again.
A problem that is occurring now is that mortgage rates have started to increase again, and while mortgage rates need to go back up, right now the housing market is still hurting and home buyers are still a bit insufficient. To assist, the Fed might make a decision to start purchasing more mortgage backed securities as well as state debt to help force the rates of mortgages downward.