Through the entire recession, the Federal Reserve has kept overall interest rates hovering near zero, in order to help keep deflation or further inflation from happening. 12 regional Federal Reserve Financial institution directors met in order to talk about urgent financial loans and their discounted cost. The very same cost being charged to banks for financial loans is being charged with these discounted rates. The Federal Reserve is charging a very low cost. Rates being raised was suggested by two Federal Reserve branches that think the recovery is too slow for it.
Federal Reserve is keeping rates low
Part of the monetary policy that the Federal Reserve has been pursuing is keeping interest rates low, even on bank loans. The strained banking and finance industry can be just fine with this. It is supposed to make sure that anybody needing to borrow money may have access to liquid capital to help them. However, signs of recovery are beginning to show, even though there is every indication that growth in the economy is going to be more modest than hoped, but that a return to more normal conditions is apparently under way.
Asking for higher rates for two Fed banks
According to Bloomberg, directors of two of the 12 regional Federal Reserve banks asked for a slight raise of the discount rate for emergency cash loans to banks, however by less than one percentage point. They think it is better to raise the fees now when the recovery is starting to happen than waiting for too long for it to get better. Currently, a fast money loan from the Fed comes with an interest rate of .75 percent. Fewer banks have to borrow money now also.
Fed says no
It is only the Federal Reserve banks of Kansas City and Dallas that want higher rates, and the raise in mind was slight. It also wasn’t adopted. There is expected to be low financial institution charges for when. It will not change.
Additional reading
Bloomberg
bloomberg.com/news/2010-09-07/fed-directors-last-month-saw-only-modest-near-term-expansion.html
