Fed mulls ways to speed recovery

August 10, 2010 at 12:00a.m.

Associated Press

WASHINGTON

Federal Reserve policymakers are in a bind: They want to say and do things that will energize the economy, but in doing so, they risk making things worse by sending signals that the recovery is in really bad shape.

Today, Fed Chairman Ben Bernanke and his colleagues on the Federal Open Market Committee will discuss whether to take any new action aimed at stimulating economic growth.

The pressure to act rose Friday with the release of July’s disappointing jobs report. That showed the unemployment rate stuck at 9.5 percent and a third-straight month of anemic hiring from the private sector.

Economists say Fed officials have a handful of options at their disposal but likely would consider two options for perking up the economy:

Clarify that the Fed will keep short-term interest rates at record lows for as long as it takes to encourage more use of credit.

Use the proceeds from the Fed’s investments in mortgage securities to buy government debt on a small scale. That could help drive down long-term interest rates.