New Stimulus by Federal Reserve Is More Likely as Economy Lags

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Current economic conditions would most likely warrant a cut in the Fed's benchmark interest rate. But of course the Fed cannot cut that rate, which has hovered near zero since late 2008. Instead it must decide whether to try improving the economy by other means.

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Several Fed officials have expressed public support for buying mortgage-backed securities because studies show that such purchases have a larger effect on mortgage rates, allowing the Fed to take aim at the troubled housing market.

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The uncertain costs of such purchases have created a higher bar for action. Some officials worry that the Fed will disrupt financial markets by acquiring too much of the outstanding volume of Treasuries or mortgage-backed securities.