economictimes
WASHINGTON: Faced with the danger of a worsening recession, Federal Reserve
policymakers at their March meeting took the bold step of plowing
economy to drive down interest rates and entice Americans to start buying again.
Documents released Wednesday provided insights into the Fed's decision to revive the economy by buying long-term government debt and boosting purchases of mortgage-backed securities from Fannie Mae and Freddie Mac.
"Most participants viewed downside risks as predominating in the near term," according to minutes of the Fed's closed-door meeting on March 17-18.
That risk came mainly from a vicious cycle where rising unemployment prompted cutbacks by consumers, which in turn led to more layoffs and reduced production by businesses. Such forces would weaken the economy even more, triggering further credit tightening and additional losses at financial institutions, the Fed explained.
Against that backdrop, the central bank decided to hold its key bank lending rate at a record low of between zero and 0.25 percent. Economists predict the Fed will hold the rate in that zone for the rest of this year and for most — if not all of — next year.
