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The Wall Street Journal: Fed searching for tools to fight the next recession

JACKSON HOLE, Wyo.—When recession hits again, the Federal Reserve could turn back to unconventional programs it used with aggression in the last crisis, Federal Reserve Chairwoman Janet Yellen said Friday in taking stock of the central bank’s long-run plans for managing the ups and downs of the economy.

The Fed traditionally cuts short-term interest rates when recession hits, as part of an effort to spur borrowing, spending and investing. But rates are near zero and aren’t expected to go much higher, leaving the Fed in a search for weapons for when the next recession hits.

Ms. Yellen said the Fed’s main tool could be bond-purchase programs, which the Fed used during and after the 2008-09 financial crisis, expanding its portfolio of assets to more than to $4 trillion today.

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