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, but by less than one percentage point. The rationale is that recovery is slow, but is occurring, and therefore it is best to raise the rates sooner instead of later. Currently, a fast money personal loan from the Fed comes with a rate of interest of .75 percent. Not only that, but fewer banks are actually borrowing these days.
It won’t happen
Only Kansas City and Dallas Federal Reserve banks asked for the higher rates. Also, the higher rates were very small. Also, there was no adoption of it. Nobody else agreed. Financial institution rates are expected to stay low for a long time.
Bloomberg
bloomberg.com/news/2010-09-07/fed-directors-last-month-saw-only-modest-near-term-expansion.html
