The Fed’s fight for control of its key interest rate

Bloomberg/Alex Harris/6-10-2018

“In response to the financial crisis, along with cutting rates, the Fed bought trillions of dollars of bonds in a program known as quantitative easing. It paid for the bonds by creating vast new bank reserves. With all that money on hand, banks had far less need to borrow from each other overnight, meaning that the Fed’s old tools of adding to or reducing reserves had less impact, forcing monetary authorities to come up with another way to influence the effective rate. Enter the interest on excess reserves (IOER) rate.”

USAGOLD note:  More on the role of excess reserves . . .for those with an interest.

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