The Federal Reserve is playing the waiting game with the stock market. With oil prices rising to over $120 per barrel, inflation is growing threat. High gas prices and groceries are causing American consumers to cut back on other products. This is stifling the US economy to the point that the government is talking recession.
Sub prime mortgages have also played their role in the downward spiral of the stock market. Banks have given out mortgages to people with less than perfect credit at higher interest rates. When the Federal Reserve raised interest rates, however, a lot of homeowners found themselves unable to pay the higher rates. Many people had to foreclose or simply walked away from their homes.
As a combative measure, the Federal Reserve has been lowering interest rates. They have stated that the recent rate cuts should be over for now, though.
The US government recently started an economic stimulus package to help with the economic downturn, as well. The package gives each taxpayer $600, couples get $1200 and $300 for each dependent child. These incentive checks were sent out to counter the high prices at the gas pumps. There is also the hope that the American consumers will take these checks and use them to buy products, helping to stimulate the economy.
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