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Perli says they might consider new ways to stimulate economic growth, including a version of a new Bank of England program that provides cheap money to banks that increase loans to businesses and consumers. Chris Jones, economist at TD Economics, says the case for more aggressive action by the Fed is getting stronger as the economy weakens and the threat of inflation recedes. The Federal Reserve Bank of Cleveland reported last month that the public expects inflation to stay below the Fed's target of 2 percent for the next decade. Inflation expectations are important because they can become self-fulfilling: Workers may demand higher pay raises or consumers may spend more now if they expect prices to rise sharply in the future. Low expectations ease inflationary pressure. Some analysts have suggested that the Fed may be reluctant to be aggressive in an election year out of concern it could be seen as affecting the vote in November. But Jones notes that the Fed slashed interest rates and took other bold steps to help the economy on the eve of the 2008 election. "The Fed is going to do what it needs to do, when it needs to do it," Jones says.
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