It has been released in the news recently that the Federal Reserve has been put under more pressure as it faces a deflation risk. What is needed is a further stimulus package to boost the economy and further measures of ensuring that the cost of borrowing remains low.

With a slow economic recovery in the US and a flagging one over the pond in Europe the dollar has been put you under more pressure. On top of that there has been the recent report of the weakness in the labour market which has had a knock-on effect into other industries. This means to maintain a steady economic growth over the next decade interest rates must be kept low whilst more currency is pumped into the current system.

Dennis Lockhart who is the president of the Atlanta Federal reserve has been quoted this week in saying that further meetings will need to be held and that discussions may run longer than first thought. It has been indicated that although the Fed’s are set to purchase another round of bonds for the second time at the end of June there is still more support needed by them and is this can be done by maintaining low interest rates.

Doing this will help to curb the deflation and also steady any sharp inflation that may arise from more currency in the economy. The dollar has found itself week against many currencies that it purchases cheap goods from, therefore making the cost of living more expensive than in previous years.

Lockhart also was quoted saying that although the first half of the year was disappointing their predictions for the second half are very promising. The Federal Reserve is also confident that 2012 will be a prosperous year and lead to a stronger recovery in all markets.

He also warned that Congress should not start cutting any spending as this will affect the overall recovery and may even work against it.

Unemployment in the USA has climbed to 9.2% and the hope that the national labour market will pick up depends on interest rates remaining low.

With a $600 billion stimulus to the economy coming at the end of June all eyes are focused on the meeting is being held between Congress and the Federal Reserve. The second half of the year has been placed under scrutiny and there needs to be an improvement in overall growth than in the first half of this year.

Discussions continue as future of the economy lies in a fragile state.