TEXT OF STORY

Renita Jablonski: Fed policy makers start their latest two-day meeting today. They’ve already fiddled with short-term interest rates for banks. The rates are essentially zero. So the Fed is considering a more drastic move. Jill Barshay has more.

Jill Barshay: The Fed controls interest rates by buying and selling short-term Treasury bills.

Tim Duy is an economist and Fed watcher at the University of Oregon. He says there’s new talk the Fed will buy longer-term Treasuries, such as five-year notes. That could make it cheaper for everyone to borrow money, not just banks. But there’s a big risk:

Tim Duy: There’s some possibility that we lose control of the situation and pump too much money in, and actually trigger an inflationary episode.

The talk comes after the Bank of England started buying up its government bonds last week. Long-term rates have fallen in the U.K.

Duy: And so now people are thinking, well the Bank of England just did this, is it the Fed’s turn?

Not right away, says Duy. He says buying long-term Treasuries is a bit like firing an unguided missile. He says the Fed won’t push that button unless the economy goes into freefall.

In New York, I’m Jill Barshay for Marketplace.