Wednesday, June 24, 2009

Fed Evaluating Radical Economic Programs

By JEANNINE AVERSA, AP Economics Writer Jeannine Aversa, Ap Economics Writer –

WASHINGTON – With signs the economy is improving but still fragile, Federal Reserve policymakers are considering whether some programs intended to drive down rates on mortgages and other consumer debt should be slowed down.

Most economists predict that Fed Chairman Ben Bernanke and his colleagues, who resumed meeting Wednesday morning, won't launch any bold new efforts at the end of their two-day gathering.

Fears have grown on Wall Street that the Fed's radical efforts to lift the country out of the longest recession since World War II could ignite inflation later on.

"Injecting additional money into the banking system is a pretty dangerous game right now, and the Fed cannot afford to press on the accelerator amid a potentially inflationary environment," said Richard Yamarone, economist at Argus Research.

Wanting to snuff out any rise in inflation expectations, the Fed could opt to tweak its already-announced programs to slow down purchases of either government debt or mortgage-backed securities. Doing so also could help avert possible market disruptions and make it easier for the Fed to reel in these programs once the economy rebounds.

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