The Federal Reserve said yesterday that it will shuffle $400 billion of its portfolio to try to lower interest rates to spike the economy. By the fed lowering interest rates helps people and companies save money on borrowing and spending on the economy. The economy relies heavy on consumer spending.
The interest rates are all ready at historic lows, however, Americans are still afraid that the economy is strengthening. Thus, Americans are not taking out new loans despite the aggressively low interest rates. Americans are fearful to buy houses when prices are still dropping.
Frank Sorrentino, CEO of North Jersey Community Bank in N.J. stated that he doesn't think the Feds decision will encourage people to buy homes or take out loans for vehicles.
The stock market fell rapidly after the announcement from the Fed, the Dow Jones dropping 300 points yesterday. The four highest ranking Republicans in Congress sent the Federal Reserve a letter urging them not to try to lower interest rates, any further then they all ready are, due to risks of creating higher inflation.
The past couple of years, inflation rates have been historically low. However, high prices for food and gas have caused inflation to spike this last year. Economists are putting a much higher concern on unemployment, rather than inflation.
See Link:http://finance.yahoo.com/news/Fed-does-the-Twist-400B-plan-apf-96033563.html?x=0
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