“The Fed at its meeting this week is expected to announce a quarter-point interest rate hike, and a 0.2 percent increase in interest on excess reserves. The maneuver is targeted at holding back the target rate, and could signal that the Fed is nearing the end of its balance sheet rolloff.”
USAGOLD note: To make a long story short, if this “maneuver” – moving the excess reserve rate at par with the Fed fund rate – comes to fruition, it translates to a signal that the Fed is now interested in aggressively pumping up the money supply and ultimately price/wage inflation.* It amounts to signalling a major easing of monetary policy and likely, in our view, to translate to fundamental consequences in all financial markets including for the dollar and gold. These revelations put a whole different spin on this week’s Fed deliberations.
* Please see: “Will banks’ excess reserves fuel a new monetary crisis?” [News & Views/March, 2017]