Fed Considers Cutting Interest To Banks…Again.
Federal Reserve Chairman Ben S. 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.
Michael Feroli, chief US econimist at JP Morgan, says the Fed may extend its time frame for keeping interest rates low beyond late 2014.
Market stability following the ECB’s move has probably prompted Bernanke to reconsider, Feroli said. Rising short-term borrowing costs may have also made the tool more appealing.
The fed funds effective rate — at 14 basis points on July 27 — has increased from six basis points at the end of September. That month the Fed announced its Operation Twist plan extending the average maturity of bonds in its portfolio by selling short-term securities and buying longer-term debt.
Also, the average rate for borrowing and lending Treasuries for one day through repurchase agreements, or repos, rose to as high this year as 0.297 percent on July 2, from minus 0.001 percent at the end of last year, a Depository Trust & Clearing Corp. index of General Collateral Finance repos shows. The rate was 0.172 percent on July 27. Securities dealers use repos to finance holdings and increase leverage.
I’m not sure where to go or what do if the rates get lower. Well, annuities are a great way to keep a guarantee rate for income during your retirement years. Ask yourself, how good would it feel to have that in place and not worry about the market?