Fed Will Seek Different Tools To Restore Economy, Dallas Fed Chief Says

Washington, D.C. (AHN) - The U.S. Federal Reserve has taken a number of steps including the provision of temporary facilities to infuse liquidity into the financial system and to stabilize credit markets, Federal Reserve Bank of Dallas President Richard Fisher said Sunday.

He added that the financial facilities will have to be unwound at some point, but the Federal Reserve will continue to seek different tools as the US economy suffers from negative growth.

Fisher, speaking at a conference organized by the Institute of International Finance, acknowledged that with the current slump in credit markets, the US economy is likely to face sluggish growth for an extended period.

"I speak for all of us when I say that the Federal Reserve will continue to explore every avenue and consider every option to see the credit markets through the credit crisis," Fisher was quoted saying by Bloomberg.

Last week, in an unprecedented action, the central banks of major economies announced concerted cut in benchmark lending rates by half a percentage point to support distressed banks.

The US Treasury is now in the process of recruiting asset managers to form a staff that will rescue beleaguered financial institutions with the help of recently approved $700 billion bailout package.

Last week, International Monetary Fund indicated that the world's financial institutions are expected to incur combined losses of $1.4 trillion due to the widespread crisis caused by the U.S. subprime mortgage contagion.

It also slashed down its forecast for global growth to 3.9 percent in the year of 2008, down from its previous projection of 4.1 percent around four months ago.

The international agency along with World Bank have decided to provide emergency plans to bailout countries affected by the financial crisis. The U.S. had also pledged billions of dollars in liquidity to stabilize global money markets.