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Bloomberg: Fed Weighs Cutting Interest on Banks’ Reserves to Spur Expansion

July 30, 2012, 07:00 AM
Filed Under: Banking News

Bloomberg reported that the Federal Reserve and Chairman Ben 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.

According to the report, policy makers are looking for new monetary tools after the Fed lowered its benchmark interest rate to near zero in December 2008 and purchased $2.3 trillion of securities to spur the economy.

The report quotes Michael Feroli, Chief U.S. Economist at JPMorgan Chase & Co. and a former economist for the Fed Board in Washington saying, “They are at the end of their rope and are probably searching for every last option for what they can do. You can’t rule anything out because they’re going to flail around and try every last thing they can.”

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