4 ms·
Why isn't the Fed raising the reserve rate (apparently it was set to 0 in 2020[1]) to reduce commercial banks creating new money? [1] https://www.investopedia.
by nverno 4y ago
Why isn't the Fed raising the reserve rate (apparently it was set to 0 in 2020[1]) to reduce commercial banks creating new money?
[1] https://www.investopedia.com/terms/b/bank-reserve.asp#citation-11 https://www.investopedia.com/terms/b/bank-reserve.asp#citati...
- rogersnm 4y agoThe Fed is doing exactly that: https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS
- nverno 4y agoAh thankyou, do you think it will spike anything like it did in the 80s? [edit: I see she discusses this in article as well, now]
- rogersnm 4y agoPredicting the future is always difficult, there are elements of now that are similar to the past, and there are elements that are different. It also helps to have experienced those past events and been able to learn lessons from them. It seems highly likely that inflation will remain at its current elevated level for at least another 12 months, beyond that horizon, the trajectory will be determined by what happens between now and then.
- imtringued 4y agoThat's a better idea than raising interest rates but it has the downside that banks are so fragile nowadays that any raise in the reserve requirement could cause a chain of bankruptcies.