Daily News: July 30, 2012

Bloomberg: Fed Weighs Cutting Rates on Bank Reserves

Bloomberg reported on July 30 that Fed chairman Ben S. Bernanke may be taking another look at cutting the interest rate the Fed pays on bank reserves to bring down short-term borrowing costs and spur the slowing U.S. expansion.

Bloomberg said that Bernanke testified to Congress on July 17 that reducing the rate from its current 0.25% is one of several easing steps the Fed might take to reduce unemployment stuck above 8% for more than three years. In February, by contrast, the Fed chairman told Congress that lowering the rate might drive away investors from short-term money markets.

Bloomberg quoted a former Richmond Fed economist as saying, “They’re reconsidering it.” The economist noted that a July 5 decision by the European Central Bank to cut its deposit rate to zero is prompting renewed interest in the strategy.

To read the Bloomberg story, click here.