Peter Ireland, E21
Since October 2008 the Federal Reserve has paid interest on bank reserves. It first introduced interest on reserves in the depths of the financial crisis, to prevent its emergency lending programs from creating excessive money growth and inflation. It continues to pay interest on reserves today, as it gradually reduces the size of its balance sheet even as it more rapidly raises its target for the federal funds rate. As soon as its asset holdings return to more normal levels, however, the Fed should cease paying interest on reserves. Read more here....
Mickey Levy, E21
Fed Chairman Jerome Powell, in his first semi-annual testimony to Congress, struck a balanced tone, emphasizing continuity in the conduct of monetary policy as the Fed pursues its congressional dual mandate of 2 percent inflation and maximum employment.
Powell’s emphasis on the Fed’s pursuit of the dual mandate reflects the Fed’s tricky position of satisfying the Congress and its two key committees that supervise the Fed — the House Financial Services and Senate Banking Committees. His testimony drew heavily on the “Semiannual Monetary Policy Report to the Congress” that the Fed had already submitted. Read more here...