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Oh really? Something tells me they are only trying to sound as optimistic as possible. With discount rates already close to zero, they can not do much more to encourage borrowing.

Other tools? Lower reserve requirements? Not a good idea as they would be risking even more troubles in the banking sector. Already people don’t have much reason to keep their money at the bank.

The Fed can keep buying securities, but returns there are getting thin (not that it should matter to the Fed). They can buy as long as they have a seller I suppose.   Is this what is meant by the rather vague statements quoted in the article?

A chorus of Fed watchers expect the FOMC to lower fed funds to zero by January, and to expand quantitative measures to pump more liquidity into markets, echoing efforts by Japan’s central bank to revive that country’s economy in the 1990s.

“The Fed has a number of options to help ease the economy through this difficult transition,” Lockhart said.

The U.S. central bank could continue to boost market liquidity even though interest rates cannot fall below zero, he said. “There are many other mechanisms that the (FOMC) can use to provide liquidity.”


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