The Fed shares the fear, and without warning lowered interest rates on January 3, before its regular policy-setting meeting later in the month. The Fed has no direct control over production decisions, including the hiring and firing of workers, which rest in the hands of private businesses. All it can do is influence those investment decisions by influencing the cost of credit to finance them, as well as the cost of financing credit purchases by consumers. Even in doing that its effects are indirect. It s not the Federal Reserve itself that creates money and credit.
Money is created by private commercial banks when they make loans.
Most banks do belong to the Federal Reserve System, but they make their lending decisions based on their own profit interests and not on some target of overall economic growth, which is the Fed s concern. This is because the bank s profit is the difference between what it has to pay for money and what it can charge for it. When the Federal Reserve orchestrates a lowering of interest rates it is short-term rates which are immediately affected. Long-term rates will come down too, but more slowly and usually not as much. So with low rates the spread widens and banks make more profit.