Federal Reserve beginning to pull back?
Many economists and observers want to see the Federal Reserve think up creative ways to pump more money into a sagging economy. Instead, it looks like they're coming up with creative ways to begin taking some of the money out:
The Federal Reserve on Monday proposed allowing banks to set up the equivalent of certificates of deposit at the central bank, a move that would help the Fed mop up money pumped into the economy and prevent inflation from taking off later.
Under the proposal, the Fed would offer "term deposits" that would pay interest. Doing so would provide banks with another incentive to park their money at the Fed, rather than having it flow back into the economy.
The proposal comes as no surprise. Federal Reserve Chairman Ben S. Bernanke and other Fed officials have repeatedly said the creation of "term deposits" -- essentially the equivalent of CDs for banks -- would be one of several tools the Fed could use to drain money from the economy when the time is right.
This is evidence, I guess, that they think the clock is readying to strike "right." It's not clear, however, exactly how fast they want to implement this program. The announcement that the Fed is thinking about fighting inflation can give comfort to inflation hawks even if it's not accompanied by any quick efforts to actually drain money out of the economy.
Posted by: AMrE | December 29, 2009 5:58 PM | Report abuse
Posted by: staticvars | December 29, 2009 11:39 PM | Report abuse
Posted by: earther | December 29, 2009 11:53 PM | Report abuse
Posted by: gfinmn | December 30, 2009 6:46 AM | Report abuse
Posted by: etdean1 | December 30, 2009 9:27 AM | Report abuse
Posted by: dsaporta | December 30, 2009 3:01 PM | Report abuse
Posted by: rosshunter | December 30, 2009 4:58 PM | Report abuse
The comments to this entry are closed.