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Federal Reserve Move May Reduce Interest Rates Further

By Mike Wheatley | September 23, 2011

The Federal Reserve is to try a new strategy in its attempt to reduce business and consumer borrowing costs and encourage economic growth in the U.S., in spite of Republican pleas not to expand its stimulus program any further, reports the New York Times.

US Federal Reserve Bank
Federal Reserve will inject $400 billion into Treasury securities © Aaron Kohr - Fotolia.com

Last Wednesday the Federal Reserve said that over the next nine months it would inject $400 billion into long-term Treasury securities, a move that is likely to reduce mortgage interest rates even further.

According to the Fed’s chief policy makers, the move was agreed upon because something has to be done to assist more than 25 million unemployed people in the country to find jobs. The economy was unlikely to expand quickly enough on its own, they added. They also pointed out that prospects for economic recovery are also facing a further risk from troubles in global financial markets right now.

In a statement released on Wednesday to announce the move, the Fed said:

“This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative.”

In recent weeks mortgage rates have already dropped to record lows, and economists are now predicting that interest rates could drop again by a few tenths of a percentage point, something that would have a significant effect on anyone looking to take out a mortgage now.

Still, the move fails to address the obstacle of tough lending standards says the New York Times, something that is stopping many potential home buyers from buying property. With lending standards so tight right now, even people with good credit scores are finding it difficult to get the best possible mortgage rates.

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected]
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