Through the entire recession, the Federal Reserve has kept overall interest rates hanging near zero, in order deflation or further inflation from taking place. 12 regional Federal Reserve Bank directors met in order to talk about urgent financial loans and their discounted rate. The low interest rate being given to banks on loans is the same thing the Federal Reserve are charging as a discounted rate. 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 the Federal Reserve has been pursuing is keeping interest rates low, even on bank loans. The strained banking and finance industry will be just fine with this. It is supposed to make sure that everyone needing to borrow money can have access to liquid capital to help them. The recovery is fairly slow right now. Even so, it appears like it is getting close and soon everything could be back to normal.
Whether or not to let two Fed banks get higher rates
According to Bloomberg, directors of two of the 12 regional Federal Reserve banks asked for a slight raise of the discount rate for emergency loans to banks, but by less than one percentage point. They think it is time to raise the charges. Fees will have to be raised ultimately and better at the beginning of the recovery than at the end. Rates of interest for fast cash loans from the Fed are really low. They’re at about .75 percent. Fewer banks have to borrow cash now also.
Fed says no
The raise was really small and only asked for by Kansas City and Dallas Federal Reserve Banks. Also, there was no adoption of it. Nobody else agreed. Bank charges 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
