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TIP488: Current Market Conditions W/ Richard Duncan
We Study Billionaires - The Investor’s Podcast Network
The Fed Controls Interest Rates by Paying Interest on Bank Reserves
Before the Fed started hiking interest rates in March, the federal funds rate was about 25 basis points. Now it's at a range between 3 and 3.25%, so banks won't lend any money at less than 3.1%. That's how the Fed is moving up the interest rates. If the Fed didn't pay interest on these bank reserves, then there are so many reserves. So that would put downward pressure on interest rates. And the Fed would be unable to push interest rates higher.
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