Federal Reserve has no plans to tighten credit supply just yet

There are currently no strategies at the Federal Reserve to tighten the credit supply of the nation just yet. Part of the Fed’s duties, of which there are many, is to monitor the supply of accessible lending capital and altering it accordingly to best fit the needs of the economy as a whole. Fear of inflation is causing several to think the Fed should reign in the supply of credit. However, the financial institution maintains the economy is too fragile to do that yet.

Not ready yet, Fed states

Food and gasoline is just a couple of the consumer goods that costs have increased on recently. Many have worried that inflation is going to start occurring. This has prompted lawmakers and finance industry insiders to question whether the Federal Reserve, the key institution in setting monetary policy and controlling things like inflation, should start restricting the available credit supply. Members of the Fed, however, are confident the overall economy is too shaky to stiffen the credit supply, according to MSNBC. At a recent speaking engagement at Yale University, Fed Vice Chair Janet Yellen said that conditions weren’t right, however the central bank would be easing off its current policy of keeping interest rates at near zero.

Need more individuals to be employed

The Fed partially controls the supply of available credit funding for the banking system of the United States and influences the interest rates that banks charge. During a recessionary period, the Fed can lend short term installment loans to banks at zero or close to zero percent interest to stimulate lending. Those banks can lend that capital to customers, as mortgages or personal loans, or to other financial institutions. There are more parts than credit to the Federal Reserve’s operations. Nevertheless, credit is the most significant. If the Fed thinks that the price inflation is being too hard on the nation’s currency, the Fed can stop putting as much capital out there. There has been a huge increase in the price of oil and food. Now, a dollar does not mean as much.

Where the CFPB comes in

Soon, interest rates on loans will likely start going back up, as soon as the central financial institution feels comfortable with the economy. This is when the credit supply can be restricted by the Federal Reserve. Banks may also have to follow rules from the new Consumer Financial Protection Bureau, which will levy fines for legal violations. The bureau will start operating in July, and spokesperson Elizabeth Warren has promised the first new regulations set in place by the bureau by January of 2012, according to Reuters. The amount that the CFPB can do hasn’t been decided in Congress just yet. Still, there will soon be more regulation to deal with.

Information from

MSNBC

msnbc.msn.com/id/42520140/ns/business-eye_on_the_economy/

CNBC

cnbc.com/id/42532601

Reuters

reuters.com/article/2011/04/11/us-cfpb-warren-idUSTRE73A5FQ20110411