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Fed helps in improving US economy

By Faye Mergel
Published: Thursday, November 25th, 2010

04November 3, 2010, Wednesday, there was an announcement made by the Federal Reserve regarding its plan in supporting and improving the now weak US market and economy. The Fed would like the public to know that the plans they are coming up with are not that similar with the traditional changes which involves changes in the policies on monetary aspect. Fed also cleared out that such policies taking place in few weeks or months will have no direct effect to any card holder.

Two days before the announcement, the Fed agreed that it will be purchasing binds from the government as a part of simulating the nation’s economy. This might worry the card holders but the Fed has given a 0 percent to 0.25 percent range and keeping 3.25 percent as a prime rate.

For now, credit card users are given protection from the sudden increase of borrowing cost. This for now is the purpose of the Fed’s intent to have a steady rate on federal funds. The Credit CARD Act of 2009 gives protection to consumers who have made some mistakes during the borrowing process and period. With the said act, lender or the banks are asked to notify the consumer in forty days regarding any increase on the APR or annual percentage rate. But when the changes in the rates are imposed by the Fed, there is an exception to the rule. When there economy is threatened though, even central banks can’t make any rate increase.

The expenditures for each American household are increasing but unemployment rate gets higher and the economy still is weak and according to the fed, this is what worries the central bank. With the unstable economy of US at present, employers aren’t willing to raise the pay and more families are burdened; a familiar scene in any country experiencing instability in its economy.

As a way of encouraging both lenders and borrowers, FOMC or the Federal Open Market Committee has announced its plans on buying government treasuries. This plan will take effect anytime now up to the half of year 2011. Dennis Moroney, the TowerGroup research director said in an email that this step done by the Fed is to give enough or even more funds to banks and lenders from the purchased government bonds. This is a way of helping stabilize the nation’s supply and demand in the lending and credit industry.

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