News / USA

US Central Bank Tries Again to Boost Economy

Federal Reserve will put $600 billion more into circulation during next few months, in bid to cut interest rates, boost economic growth and cut unemployment

Unemployed people use computers and telephones to search for jobs and seek out unemployment insurance benefits at the Nevada JobConnect Career Center in Las Vegas (Sep 2010 file photo)
Unemployed people use computers and telephones to search for jobs and seek out unemployment insurance benefits at the Nevada JobConnect Career Center in Las Vegas (Sep 2010 file photo)

The U.S. central bank announced on Wednesday that it will put $600 billion more into circulation during the next few months, in a bid to cut interest rates, boost economic growth and cut unemployment.  Critics point out that interest rates are already at historic lows, and they say it is unlikely that further cuts will spur significant growth.

Federal Reserve officials are trying to speed up economic growth to cut the 9.6 percent unemployment rate.

The Fed's plan is to print more money and use it to buy government securities.  That would put more dollars into circulation in the hopes of reducing long-term interest rates paid by businesses and consumers who borrow money.

Equities trader Cort Gwon of FBN Securities in New York supports the plan.

"It will bring a lot more liquidity into the markets, which will help financial firms, banks, lending," Gwon said. "It will help the general economy really get back to growth."

A large volume of money in circulation could lower interest rates much the same way a large number of empty apartments on the market would make it easier for prospective tenants to bargain for lower rents.

Lower long-term interest rates would make it easier for people to borrow the money they need to buy homes.  And lower rates would enable businesses to buy equipment to expand their operations and create new jobs.

Joe Gagnon of the Washington-based Peterson Institute for International Economics calls the proposal "a step in the right direction."

"The Fed needs to do something like this," he said. "I actually think this is less than they should be doing."

Gagnon says the Federal Reserve has two jobs - to maximize employment and to keep prices stable.  And he says the Fed's plan will help on both fronts.  He says inflation is so low now that the economy could fall into a damaging downward spiral of declining prices and wages called deflation.

But critics, like Gerald Hanweck of George Mason University, warn that a flood of new money into the economy will more likely make the value of the dollar decline, sparking inflation.

"It does not seem to have a big benefit, but at the same time it has some costs," he said.

Hanweck says the Federal Reserve's action could do the opposite of what officials intend.  That is because rapidly rising prices would make lenders worry that they would be repaid in future dollars that would be less valuable due to inflation.  That would prompt banks to raise interest rates to protect their investments.  And higher interest rates could stall the economic recovery.

Related report by Mil Arcega:

You May Like

US Imposes Sanctions on Alleged Honduran Drug Gang

Treasury department alleges Los Valles group is responsible for smuggling tens of thousands of kilograms of cocaine into US each month More

At 91, Marvel Creator Stan Lee Continues to Expand his Universe

Company's chief emeritus hopes to interest new generation of children in superheroes of all shapes and sizes by publishing content across multiple media platforms More

Photogallery New Drug Protects Against Virus in Ebola Family

Study by researchers at University of Texas Medical Branch, Tekmira Pharmaceuticals is first looking at drug's effectiveness after onset of symptoms More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
African Media Tries to Educate Public About Ebolai
X
George Putic
August 20, 2014 8:57 PM
While the Ebola epidemic continues to claim lives in West Africa, information technology specialists, together with radio and TV reporters, are battling misinformation and prejudice about the disease - using social media to educate the public about the deadly virus. VOA’s George Putic has more.
Video

Video African Media Tries to Educate Public About Ebola

While the Ebola epidemic continues to claim lives in West Africa, information technology specialists, together with radio and TV reporters, are battling misinformation and prejudice about the disease - using social media to educate the public about the deadly virus. VOA’s George Putic has more.
Video

Video Ferguson Calls For Justice as Anger, Violence Grips Community

Violence, anger and frustration continue to grip the small St. Louis suburb of Ferguson, Missouri. Protests broke out after a white police officer fatally shot an unarmed black teenager on August 9. The case has sparked outrage around the nation and prompted the White House to send U.S. Attorney Eric Holder to the small community of just over 20,000 people. VOA’s Mary Alice Salinas has more from Ferguson.
Video

Video Beheading Of US Journalist Breeds Outrage

U.S. and British authorities have launched an investigation into an Islamic State video showing the beheading of kidnapped American journalist James Foley by a militant with a British accent. The extremist group, which posted the video on the Internet Tuesday, said the murder was revenge for U.S. airstrikes on militant positions in Iraq - and has threatened to execute another American journalist it is holding. Henry Ridgwell has more from London.
Video

Video Family Robots - The Next Big Thing?

Robots that can help us with daily chores like cooking and cleaning are a long way off, but automatons that serve as family companions may be much closer. Researchers in the United States, France, Japan and other countries are racing to build robots that can entertain and perform some simpler tasks for us. VOA’s George Putic reports.
Video

Video In Ukraine, Fear and Distrust Remain Where Fighting has Stopped

As the Ukrainian military reclaims control of eastern cities from pro-Russian separatists, residents are getting a chance to rebuild their lives. VOA's Gabe Joselow reports from the town of Kramatorsk in Donetsk province, where a sense of fear is still in the air, and distrust of the government in Kyiv still runs deep.
Video

Video Five Patients Given Experimental Ebola Drug Said to Be Improving

The World Health Organization has approved the use of experimental treatments for Ebola patients in West Africa. The Ebola outbreak there is unprecedented, the disease deadly. The number of people who have died from Ebola has surpassed 1,200. VOA's Carol Pearson reports on the ethical considerations of allowing experimental drugs to be used.
Video

Video China Targets Overseas Assets of Corrupt Officials

As China presses forward with its anti-graft effort, authorities are targeting corrupt officials who have sent family members and assets overseas. The efforts have stirred up a debate at home on exactly how many officials take that route and how likely it is they will be caught. Rebecca Valli has this report.
Video

Video Leading The Fight Against Islamic State, Kurds Question Iraqi Future

Western countries including the United States have begun arming the Kurdish Peshmerga forces in northern Iraq to aid their battle against extremist Sunni militants from the Islamic State. But there are concerns that a heavily-armed Kurdistan Regional Government, or KRG, might seek to declare independence and cause the break-up of the Iraqi state. As Henry Ridgwell reports from London, the KRG says it will only seek greater autonomy from Baghdad.
Video

Video In Rural Kenya, Pressure Builds Against Female Circumcision

In some Kenyan communities, female genital mutilation remains a rite of passage. But activists are pushing back, with education for girls and with threats of punishment those who perform the circumcision. Mohammed Yusuf looks at the practice in the rural eastern community of Tharaka-Nithi.

AppleAndroid