Fed has already slashed interest rates to near zero, promised to hold them there for extended period, and flooded the economy with more than $1 trillion in additional credit to get things going.
What ammunition does the Fed have left?
(these are the 3 items that I think are possible)
Hold Mortgage-Related Asset Levels Steady on Balance Sheet
To ease the 2007-2009 financial crisis, the Fed bought about $1.3 trillion in mortgage-backed securities and debt issued by government-sponsored mortgage finance enterprises to lower mortgage rates, stimulate homebuying and push additional credit into the economy for banks to lend.
Buy More Assets
The Fed could buy more mortgage-backed securities, or since its holdings of MBS are already so large, it could buy more long-term Treasury securities. Moving to buy more assets only months after declaring its buying spree over would be a risky flip-flop for the Fed, which tries to be as steady and predictable as possible
Open a New Lending Facility
The Fed could open or keep open a lending facility to increase credit availability for any sector of the economy it wants to help, such as commercial real estate.
The Fed would have to argue that crisis conditions exist in order to lend to non-banks, and may be shy about doing so after similar actions were criticized during the 2007-2009 financial crisis.
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